The resources war could cost us dearly

Our resource giants are preparing to eat themselves, gearing up for a fight to the death where only the strongest or most efficient will survive. This war could cost the national income dearly, writes Ian Verrender.

A stunning set of numbers. That's the only way to describe BHP's production figures last week, particularly when it comes to iron ore, the nation's biggest export earner.

It has become something of a tradition. Every year for the past 14 years, the big multinational has gouged ever increasing amounts of red dirt from the Pilbara, loaded it onto ships and sent it offshore to feed the world's, and to an increasing extent China's, steel mills.

This year it was 225 million tonnes, more than expected. That's forecast to rise next year to 245 million tonnes and as much as 270 million the year after.

It's the same story over at Rio Tinto. And at Fortescue. Then there are the juniors, the start-up hopefuls like Atlas Iron that plunged in when it seemed the boom would never end. Volume growth is on an exponential path and shows no sign of tapering.

Prices, meanwhile, are under pressure. They dropped to $US90 a tonne a few weeks back - about half the 2010 peak - and are on the slide yet again. Those producing lower grade ore are being arm-wrestled to take ever bigger discounts for their product.

Combine those two factors and it all adds up to a disturbing scenario. Our resource giants are preparing to eat themselves, gearing up for a fight to the death where only the strongest or most efficient will survive.

They now are in the process of churning out ever greater volumes to make up for lower prices, a strategy that only serves to further depress prices, just as demand growth in China has slowed.

Just as the nation rode on the coat-tails of the boom on the way up, the next phase could prove painful.

The stakes are high. Having spent so much on capital investment in the past decade, no one is willing to blink, certainly not the majors who have the lowest cost structure. There now is a very real danger that, as they prepare to cannibalise themselves, they will drag national income lower.

A confession is required here. For the past two years, I've argued the resources boom was permanent, that while the investment phase was coming to an end, the increased production - and hence the value of exports - resulting from mine expansions would make up for the shortfall in investment funds flowing into the country.

But that assumed prices would remain elevated. Instead, what has happened is that China's development focus is shifting from building and infrastructure as its overheated property market begins to melt. Demand growth is cooling rapidly well before supply has peaked.

At some stage, the pressures will become too much to bear. There will be mine closures and corporate collapses, in China as well as here and elsewhere.

This is all occurring just as the "mining capital expenditure cliff" looms. In fact, we've already tipped over the edge. In the March quarter, Australian Bureau of Statistics figures showed mining investment fell 10 per cent, or $2 billion, and this is expected to accelerate in the years ahead.

No one seems particularly concerned about this brewing storm. Investment banks continue to spruik even the junior miners as buying opportunities, just as Rio boss Sam Walsh gleefully gears up for all out war.

At least Treasury was under no illusion about the state of resource markets. In the most recent federal budget, iron ore exports in the year ahead were forecast at what then appeared to be a conservative $US80 a tonne.

At some stage, the pressures will become too much to bear. There will be mine closures and corporate collapses, in China as well as here and elsewhere, and the global market will revert to equilibrium. But who will blink first? And how long will it take?

In the meantime, we will be faced with a situation where the boom could become a drag, where we could end up worse off as export volumes soar, a phenomenon highlighted last week by Professor Ross Garnaut in The Australian Financial Review.

It is easy to be critical with the benefit of a rear-view mirror. But while we avoided the wages blowout and runaway inflation that accompanied previous resource booms - such as in the late 1970s - it would be tough to argue that Australia has done anything other than squander the proceeds this time around.

Manufacturing is in serious decline and all export-exposed sectors have suffered as the artificially high domestic currency has squeezed them out of business. While politicians argue and bicker about the effect of the carbon tax on industry, it is the mining boom that has plunged an Aussie dollar spike into its heart.

To make matters worse, the sudden decline in the terms of trade has barely made a dent in the Aussie battler as it continues to render vast swathes of our industry uncompetitive. It may be 10 per cent below its peak. But iron prices are 50 per cent down and coal prices have crashed as well.

The dollar refuses to budge, primarily because the great global experiment in zero interest rates has seen a deluge of speculative funds flow in to Australia. Our interest rates may be at record lows but they are still well above those of most other developed nations and come with AAA credit rating to boot.

The Reserve Bank, meanwhile, appears unwilling to address these concerns, merely hoping that low interest rates eventually will lead to an increase in productive activity rather than the speculative plunge into Sydney and Melbourne real estate.

They may be considered Australian companies, but both BHP and Rio Tinto are dual listed in Australia and the UK. And it is the London investors who call the shots.

Treasurer Joe Hockey is focused purely on economic growth. Those ever expanding shiploads of dirt will certainly achieve that, at least in terms of Gross Domestic Product. But GDP numbers will hide the truth for they do not fully take prices into account. As a result, they won't reflect the decline in national income from lower commodity prices.

Like his counterpart at Rio Tinto, BHP's Andrew Mackenzie appears to be relishing the prospect of a price war. He's slashing costs and squeezing efficiencies. The construction workers are steadily departing and even on the production side, far fewer will be employed to extract each tonne of dirt as mining becomes ever more capital intensive. So no real benefit in national employment

Despite the recent price falls, the two resource giants still operate on enormous profit margins as their production costs are still way below current prices and well below their competitors.

They may be considered Australian companies, but both BHP and Rio Tinto are dual listed in Australia and the UK. And it is the London investors who call the shots. They were the ones up in arms at Marius Kloppers and Tom Albanese and their constant expansion and acquisition plans.

Those global investors made it perfectly clear in recent years that they wanted to cash in on the Australian resources boom. Now they are about to get it. Along with a hefty dividend accompanying BHP's $US13.5 billion expected earnings announcement next month, there could well be a $US2 billion share buy-back - quite possibly for London investors only.

If the speculation is correct, it would be an incredibly tax effective way to distribute wealth owned by Australian citizens to foreign investors.

Talk about exquisite timing. It might even coincide with the removal of the Minerals Resources Rent Tax, thereby cementing our reputation as a nation of dills.

Ian Verrender is the ABC's business editor. View his full profile here.

Smartest Person in the Room.:

Rabbithole:

28 Jul 2014 10:14:16am

"the resources boom was permanent"

This is the short sighted imperialist view of reality. We r the Great Southern Quarry and that is what the empire wants of us.

What happens when we have dug everything up just leaving gaping hole in the landscape full of contaminated mine water. The aquifers are nearly all poisoned with benzine radioactivity and salt, agriculture is failing, the soil is eroding, the reef and fishing stocks are dying.

We will be a nation of starving beggars. That is the path the ALPLNP imperialists are sending us down, highlighted by this shortsighted view on resources that they will last forever. In the process however we are destroying everything else.

the egg:

28 Jul 2014 1:04:35pm

Just another thoughtless, mindless thought bubble coming from the worlds worst and nastiest treasurer.He reminds me a bit of Nicholai Caecescu (Ginas dad's mate).Lives in a multi-million dollar mansion and wants to flog the serfs to make sure we understand our place around here.When we get the chance at the Ballot Box let's all hope enough serfs have been flogged and realise that it was all garbage politics and voodoo economics 101.

stalga:

28 Jul 2014 9:29:20pm

Egg, hi, I am a bit gobsmacked that you say Lang Hancock and Caesescu were friends. That guy was a monster, right up there with Stalin etc... It makes the mind boggle, although there is little merit in clang associations or knee jerk speculation.

Caesescu is a classic example of a person who was never fit to rule because he was a sick man. His own family life parallels the damage he did to his country. In this era of corporations becoming larger than national economies it is increasingly pertinent for citizens to ask "Who sits on the board? Who owns this company? Who is this person?" Examples must be set by those at the top if citizens are expected to play the game.

Back to the article, if a financial adviser told the average person to put all their eggs in one basket instead of maintaining some diversity many would say he was a dill, or was playing you for a mug. Our second rate political culture is the real culprit. A liberal Senator wore a tshirt in the House last week given to him by a coal company to goad the opposition. What a grub! Some think it is just a game.

CC:

28 Jul 2014 1:16:43pm

Rabbithole ... it is a big country and we only live in a minuscule part of it.If there are worthwhile minerals why wouldn't unlock their prosperity.Sure we have to not spoil the environment but we can coexist with modern mining if we are thoughtful.

Jerry Attrick:

28 Jul 2014 2:26:10pm

CC, every time I see hectares of hole-in-the-ground, where there was once untouched wilderness (yes, even deserts are wilderness, with a fragile biology) I feel even more strongly motivated to support wind, wave, or any other kind of power that doesn't involve tearing up the land so that we can burn dirty carbon.But apparently, Joe Hockey finds massive, open-cut coalmines less offensive than wind-farms. Can't really empathise with this government.

Rabbithole:

CSG gas pollution will cover most of Australia in the next 20 years. We r not talking mining little area now, its most of Australia and its only just starting.

Its not about unlocking prosperity, it is about Empire and multinationals commandeering the Common Good and National Interest.

As for ALPLNP apparent conspiracy, i am wrong in thinking that these 2 corporations are financially dependent on corporations for survival? It is also a conspiracy that these corporations also pay for there scholarship and their kids scholarships?

Why isn't the Office of the PM a part of the Constitution? Is that a conspiracy against the PM? Is that a conspiracy against the people to centralise power to corporate gangs in parliament? Is that why the ALP and LNP when in government go a little loopy and start destroying the national interests and Common Good?

Jake:

28 Jul 2014 3:07:13pm

CC if I went into your garden with some pegs marked it out and said this is mine and I subsequently sold it to some Koreans you would say you can't do that you can't steal my land but that is just what Gina gets away with, If it was for our prosperity it would be OK not it is not.

Jimmy Necktie:

28 Jul 2014 5:04:27pm

"you can't steal my land but that is just what Gina gets away with"

Gina doesn't steal your land. Gina leases the mineral rights which were never yours in the first place. If you discovered minerals on your property you don't get to keep them, they belong to the state.

Jake:

OK:

29 Jul 2014 8:28:31am

How right you are Rabbit. Those mega-profits won't be spent cleaning up any of the massive pollution we are paying these multinationals for. They will take their (ie "our") profits and leave - as they do virtually all over the world.

harvey:

We are a nation of people unparalleled in our generosity. Australians support giving away our wealth to others, a lot like Bill Gates or Warren Buffet do. We are an example to the rest of the world.

While the billionaires give their money to the poor and sick, we absolutely fall over ourselves to give away our money to the rich. We recognise that the rich are just people too with money worries, health problems, family breakdowns etc and they need our support.

That is the virtue of us Aussies, we treat everyone alike, no discrimination. And good on us! Like Jesus said, the meek shall inherit the Earth.

Hassa:

Peter of Melbourne:

28 Jul 2014 5:57:53pm

yeah PtL but it is quite easy to go to each States website and peruse exactly how much they have to pay in royalties.

i did it not long ago and it worked out to cents on the dollar, meanwhile those same State governments allow extremely generous royalty free periods whilst the taxpayer funds the core transport infrastructure.

no we are miners and dont use the nations transportation networks even though we are hundreds of miles inland with no access to oceanic ports!

paying royalties to extract the minerals is fair, as is paying for any profit made from the sale of those resources. if they dont like it there are always regions in the deepest darkest africa they can go to... nice stable regions with no hint of civil war or tribal conflict!

they mine here they have security and that is something they have to pay for no matter where on the planet they go to.

rusty cairns:

28 Jul 2014 8:12:33pm

Gday PeterSome miners don't pay royalties for years after they have begun mining. Please read about McArthur river mine for example where millions of tonnes of ore was shipped over 11 years and no royalties were paid over that time.Add to that now an uncontrolled fire of "burning rocks" in the overburden have caused the need to change practises to prevent the same from happening in new overburden piles.Which means that not enough was spent on the overburden piles (now on fire ) to prevent fires. i.e. money before environmental safety measures. Please read about the toxins being released by this fire, flora and fauna will suffer for decades if they survive. Tax payers have paid millions to make an old gold mine (Mt Todd ) safer from environmental damage here in the N.T. The mining company left a $900,000 clean up fund before it went into receivership but over $5 million has been spent by tax payers and more money for work is required. The environmental damage from this mine which has occurred already will never be paid for or rectified. State governments hadn't increase the amount to be paid by royalties for years until the mining tax was legislated and because this tax was reduced by the amount of royalties paid the state governments raised the cost of royalties without any complaint from those paying the Mining tax.Funny how all of a sudden a rise in the cost of royalties was seen as a good idea to increase state government revenue ?

burke:

dubious the third:

28 Jul 2014 2:38:08pm

This "our wealth" we are so generously giving away...... post Mabo 1 and 2, "our wealth"??It seems patently obvious that the minerals do not belong to oi oi ois, who are just meat in the sandwich as The Crown allows for the stealing of more and more, selling it off before they get sprung.The initial 40% equity in profits as proposed by Ken Henry, was to tax Corporations, a jurisdiction of the Feds., and then the royalties could be paid to the rightful owners of those minerals being handed to the Corporations.Oh well, too late. I just hope that the politicians who continue this theft, and knowingly for the past 20 years, are made personally liable, rather than taxpayers have to foot the bill for the political incompetence/greed.

Peter of Melbourne:

dubious the third:

28 Jul 2014 6:49:50pm

The highest imposed Court on these lands, determined over 20 years ago, that these lands were "settled" as if the Doctrine of Terra Nullius had been applied, that is, as if no Rightful Residents existed here.To overcome this legal technicality, it was decided that wherever The Crown had not already interfered in a piece of these lands, there remained hereditary owners than preceded any claim by The Crown.Thus Native Title was invented.Just as it's true for the topsoil Title, the same principle must apply to anything under the soil, so any new mining applications and approvals appear to be illegal if the Rightful Owners have not offered their Consent, nor been paid the relevant Royalties.....as to your point about iron implements, gee, Peter of Melbourne, it's gone way over my head, beyond my simple logic. Perhaps you are implying that it's okay to steal from people if they aren't using something that they own. Is that it? Can such logic apply to people's holiday homes, or second cars?

dean:

28 Jul 2014 11:21:13am

We have a lifestyle that is the envy of the world and have work conditions and wages that, when compared to the rest of the world, are incredibly generous. The extreme example of how good things are is we have unions who want to strike because the tug boat operators are only getting $250k.

We have a largely publicly funded health care system, we want to have the best disabled support system in the world, we have well funded education system. We have Labor and Greens suggesting we do not have a debt problem and we should take every Asylum seeker that fronts.

Our manufacturing is failing because we do not want our people working for between 1/2 and 1/15 of the wages that our competitors do.

Did it ever click with Ian Verrender, the Labor party and the Greens that the mining industry might have something to do with the countries prosperity? All and Sundry seeks to label the miners as almost criminal.

Could someone explain just how they expect our country to maintain our massive spending, low productivity, high wage economy / lifestyle without our mining industry????

Most people appear experts on how to spend money but there are very few who know how it is generated.

The miners are making money, but have massive reinvestment programs. They also pay a massive array of taxes .

Noah's Ark:

Andie "But the excessive rates the unions want to retain are doing damage."

In the lowest wage category of Hospitality and Retail. I don't think so. I get so sick and tired of all unions and employee reps being tarred with the one brush.

If the business can't pay these wages then it is a failed business venture. Business in these areas of hospitality and retail are affected much more by other factors. Such as a council allowing/cramming more business of the same type to open in the same areas as is happening in NorthBridge in Perth. And shopping centre cartel owners squeezing in as many retail and coffee type shops as they possible can, even by bottling up the median walkways down the middle of such shopping centres. Couple this excessive rents and excessive council regulations then there you have it. No use blaming wages.

Now if you are talking MUA or CFMEU then you have a point. But to bash all unions because of a couple of militant ones is wrong.

Frank:

28 Jul 2014 2:56:41pm

Increased "penalty rates" are you joking. There is no unemployment problem in Australia so why should any business pay penalty rates at all, let alone increasing them. When the Government stops Kiwi's coming here poaching jobs then I might start thinking we are doing it tough on the employment front and penalty rates might be warranted, but with hundreds of thousands of them here, there must be jobs a plenty and wages to match. Mining and Contruction and the kiwi's love it all at our owns expense. When the Australian Government (who-ever is in power) has the guts to scrap the ridiculous "Trans Tasman Travel Agreement" then I might think they are concerned about Australian Jobs and wages, but while nothing is done about that......there isn't any problem.

Jimmy Necktie:

Jimmy Necktie:

28 Jul 2014 5:18:23pm

yet the government is happy to keep people on the equivalent of $6.44/hr ($245/38hrs) while making them apply for 40 jobs a week (in my area I doubt there are even 40 jobs going). But they're not allowed to take a job for say $13/hr which would double their income, give them skills and get them off the dole because to work for less than min wage is demeaning slave labour.

Why not let them at least have the weekend jobs at non-penalty rates? Too simple?

dean:

28 Jul 2014 5:03:36pm

Clarke As the mining industry backs off its investment pipeline, the scale of their spending will be acutely felt - it already is.

Those saying the mining industry is a small employer conveniently fail to take into account the consultants, suppliers, transport operators, work health and safety, machine shops, service centres, car and truck sales and servicing industry, professionals, etc etc.

Those saying the mining industry sees its profits going oversees forget that the majority of expenditure, jobs, royalties and taxes investment is happening in Australia. Other than that you too can share in the profits - just buy shares !!!!!!!!!!!

As for your comments about business - I own a mid range company and employ over 50. We suffer from skill shortages because those with experience and skills are working in the mining industry. Despite this we can still operate with our own training programs etc.

Your $2per hr snap just takes the cake. Rhinharts comment in context confirms that our miners compete on the world stage. Our FIFO workers are not earning $2 or even $30 per hour - they are costing the employer well over $100 per hour by the time the workers massive wages, accom, flights and very comfortable conditions are added in.

You are out of touch as are the Greens. Hockeys description seem apt - you would appear to be one of life's leaners not a lifter.

curly:

29 Jul 2014 6:16:14am

dean I am afraid you are talking over the head of the experts they are anti almost everything certainly those naughty fossils they don't have super because the super funds have the hide to buy shares in those terrible miners who employ thousands of people who keep their families and those naughty miners pay taxes in many shapes and forms tut tut

rusty cairns:

29 Jul 2014 8:41:16am

Gday deanI'm not sure you realise how much infrastructure used in Australia's mining industry is manufactured overseas these days. Almost all of it, mate.There are about 6 companies that manufacture modular housing in Darwin, none of them got to tender for 250 modular building for the new gas plants workers village and 250 buildings were manufactured and shipped from China.What chance has our manufacturing industry have when the government is prepared to have ADF sea vessels built overseas ?Why are trade deals done that benefit other countries manufacturing industries and our country's only benefit is agriculture ? It just takes a few years of drought and being able to export more agricultural products becomes almost impossible. Our last federal government wanted to legislate the "Australian Jobs Act " which meant that law would require investment of over 5 million in Australian would require that tenders be asked for from Australian companies. How can Australian companies compete when they aren't even given the chance to submit tenders ?

Noah's Ark:

29 Jul 2014 11:43:21am

rusty cairns

"What chance has our manufacturing industry have when the government is prepared to have ADF sea vessels built overseas ?""

Talking about the tender for our next fleet of submarines to be purchased from a foreign nation by this Abbott government. This is a disgraceful act. In effect it is treasonous. It is beyond the realms of reasonable. It stinks. Abbott hang your head in shame.

So the Abbott government is prepared to put the last nail in the coffin for our most technological and advanced manufacturing industry of building and maintaining our submarine fleet. For what exactly. These nutcases don't care about us (Australians).

LeftRightOut:

28 Jul 2014 1:22:54pm

Our manufacturing is failing for many reasons with pay rates being just one. Don't forget the value of the dollar which has been pushed up by the mining boom. Local prices are also being pushed up e.g. natural gas & electricity, making production more expensive. You might also want to consider the impact of free trade agreements which tend to work against local manufactures.

Our wages are relatively high, but then again so is our cost of living due to property prices. Why shouldn't workers get fair pay. The executives think they deserve their multimillion dollar pay packets for yelling a few orders, yet don't want to pay much for the labourer's who get theit hands dirty making the executives look good.

We have a very strong economy, if you believe what Hockey said on a visit to New Zealand, so why should we be cutting funding to health & education? Our education system is falling behind globally yet the government thinks funding cuts is good. We also import a lot of workers because we have a skills shortage. Interesting how this happened about a decade after governments turned their backs on apprenticeships.

The mines may be making money, but the majority of the profit goes to overseas investors with the average Australian only seeing increasing local costs.

Peter the Lawyer:

28 Jul 2014 3:02:38pm

Several issues stand out in your post. Firstly, education and health are really State reponsibilities. Secondly, since when hads is been proved that increasing education spending actually imporoves education. In fact Austrlai's education performance went backwards under Labopr Governments, State and federal, that were always telling us how much more they were spending.

dean:

28 Jul 2014 4:07:09pm

LeftRightOutAgree with your comments on the dollar.

I don't agree about comments about our cost of living - I believe our collectively high expectation of what we deserve to have (materially) is far too high. Combined with our "Australians Standards" is driving cost of housing to ridiculous levels.

Todd:

28 Jul 2014 1:33:06pm

Absolutely agree, Dean.

To be fair to the ALP/Greens coalition, the Greens have never supported the opening of one mine or the granting of one mining lease. Some of their more honest supporters would admit to being againt mining - like most environmental groups. Then you have the less honest supporters that make out the Greens are not against mining, they just want a larger share for the Government - which necessarily means less for the private individuals who actually provide the capital to enable these projects. The Greens always have and always will do everything in their power to reduce mining in Australia.

I would also like to point out that while the nationality of shareholders is irrelevant, Australians can choose to buy shares in in these miners, but they obviously choose not to. Maybe it is because we know that the Greens have joined the ALP and chances are, therefore, that the Greens will be shaping policy in this area half the time moving forward (if we assume an equal number of ALP/Greens governments as Liberal/National Governments). I would not touch Australian miners with a 10 foot pole, if current polling is to be believed. Just as the miners look like getting a bit of a break, it looks like ALP/Greens will be in power in around 2 years. There will be no NEW investment in mining in this country while ALP policy is held hostage by the Greens.

Abbott can say we are open for business all he wants, but when business sees the Greens buttering up for another couple of terms come 2016, they think twice - and so they should. Then we have the Libs announcing that any of us could be made to work for the dole at a moment?s notice. The move does not even impress the likes of me as it does not even save any money, rather it costs more due to administration and micro-managing cases now anyone could be made homeless, say, if their employer becomes insolvent etc. How many of us can say we will never be out of a job again? The Libs new policy will mean nobody can rest easy, unless you have no debt and a MASSIVE stack of cash. The fact is, there are effectively now no unemployment benefits (if one has to work 30 hours a week for about $250pw) yet my taxes have not come down one iota in order to me to squirrel money away to pay my mortgage if I ever find myself out of work (even through no fault of my own). And unlike WorkChoices, this will adversely affect everyone except the independently wealthy. Labor will make enough mileage out of it for at least two, maybe three terms. Which means we get Greens policy retarding the two things we are/were good at, mining and agriculture.

So we have political morons (the Libs) or economic vandals (ALP/Greens) to choose from come 2016. Dark days ahead, I?m afraid.

Clarke:

28 Jul 2014 3:24:12pm

"less honest supporters that make out the Greens are not against mining"

Nice straw man. Honest people would actually bother to look at the Greens policy on mining. I quote:

"The Australian Greens want a mining and mineral exploration sector that meets stringent environmental protection standards and delivers both long and short term benefits to the wider Australian community."

Contrary to your ignorant assertions, there is no love lost between the Greens and the ALP.

Todd:

28 Jul 2014 5:21:11pm

Devil's in the detail, mate. It is the bit about "meets stringent environmental standards" that is the catch all that stops mining. Could one not argue that digging a hole in the ground and taking the natural earth away, even if replaced, would not meet "stringent standards." I have no problem if you are against mining virgin deposits as I am against logging old growth forests. It just shows how dishonest they are as they won't admit to being against mining. Rather they use weasel words in their PR material and it seems to work, at least it did on you.

Toc:

29 Jul 2014 7:46:09am

Are you sure you've talked to anybody actually in the Greens, you know, someone who is actually a paid up member of the party?Well I am and I have been working in mining for a long time now and I'm not the only one. The Greens do not want you to live in a cave, unless that's what you want to do and you can do it without making an environmental mess of the area. The Greens do want you to access a high material standard of living, but don't want you to destroy everyone else's environment doing so.The Greens do want mined materials recycled after use not dumped. The Greens do want renewable energy used not. Fossilised sunlight which can only be replaced over multi 100's of million year periods is not only incredibly inefficient, it is also an impossible way to run a long term high tech society.The people you are arguing for not only don't care if you live or die, they don't care even care if the life you have is nasty, brutish and short as long as they make money.

Todd:

29 Jul 2014 11:41:22am

Toc, generally we source our materials from nature. At the moment we cannot produce steel, glass etc with power from renewables alone. So when they say they do not want to use fossilised sunlight, that precludes a high material standard of living at current levels of technology. And how to you reconcile the wish to minimise the use of fossil fuels and the move to block an increase in the excise of petrol, a widely used fossil fuel?

Again, you have been sucked in by the Greens PR material, while ignoring what they actually do. It is like Liberal PR material saying they believe in helping people help themselves? Sounds good, doesn't it? I look beyond the PR and see that statement actually means "we will remove all saftey nets." If you think that any party's PR material will cast them in anything but the best light, think again.

Todd:

29 Jul 2014 11:32:31am

OK, Clarke. The Greens and ALP hate each other - but always vote with each other - except for one or two issues. Like when the Greens opposed an ETS, but have the hide to say they want action on climate change. The Greens, and the Greens alone, have stopped action on climate change at every turn. Blocked the ETS. Now they want to block Direct Action (along with Labor) so there will be no action on climate change. No action is better than some action? Then there's the fuel excise that the Greens opposed - and surprise, surprise Labor opposed it too. But if actually believe Labor and the Greens are enemies, then you entitled to that opinion. I respectfully disagree.

rusty cairns:

ram:

28 Jul 2014 9:30:33pm

The economic vandals are the liberals. Before they brought in the GST my company used to employ over 150 (mostly union) staff -- and we made geophysical exploration (i.e. mining) equipment. After the GST, we are down to 3 in Australia.

The GST added $20 of accounting costs to every electronic part that otherwise cost a few cents. Foreign multinationals found they could dodge the GST by bringing in ALL their equipment from overseas and NOT buying otherwise lower cost Australian goods.

Now we do most of our production in Eastern Europe where it gets sold to multinationals and some of it get imported (without GST but also without Australian taxpaying employees) back into Australia. It is as if the LNP's intent was to cause as much damage to Australia's economy and environment as possible.

Todd:

29 Jul 2014 11:02:05am

You have off-shored your labour most likely due to excessive Union demands. How could you possibly incur $20 accounting costs per transaction when the GST, from an accounting perspective, is far, far less complicated than the raft of taxes it replaced. In fact, most accounting software assumes a GST/VAT component. As opposed toi peculiar taaxes like Payroll Tax that is not contemplated by default in most accounting software.

I am not a Liberal cheerleader as I am entirely opposed to a variety of their new measures that inflict pain on all Australians without saving a penny. It seems you may be a Labor cheerleader though, as you are the furst person I have ever heard claim the GST has high compliance costs. It doesn't.

capewell:

Do we have a lifestyle that is the envy of the world? or do we just like to tell ourselves that? I am sure its the envy of the 3rd world , but apart from that probably just a nice spot for a holiday.

Australian manufacturing makes the wrong things at the moment. Saying its impossible because costs are high is a cop out or an acknowledgement that we are only capable of low end manufacturing. High cost countries like Germany, Italy, and even Switzerland manufacture goods which are high quality, high value and often very specialised.

burke:

rgb:

28 Jul 2014 9:37:22am

the dills are the ones who support a petroleum rent resources tax but for political reasons oppose a mineral rent resource tax especially in a economy that has a inbuilt revenue stream problem especially now that the flawed mrrt is just about to start paying dividends.

harry:

28 Jul 2014 11:17:27am

Perhaps those people realise that petroleum is rather scarce and isn't subject to dozens of other projects coming on line and reducing prices due to oversupply whereas iron ore is rather common and dozens of sites are around which when developed will lead to the price drops we are seeing. That's why the introduction of a 30% tax, out of the blue, for miners who succeed, is so dim-witted. The investment period is in the order of a decade, $10s of billions required to build a new large mine and then bingo a random tax on success. They'd rather take their investment to any one of a dozen other sites. That's why Australia is no longer the top destination for mining investment after decades of being well clear of other nations.

That's what Labor does, it seeks a short term cash injection while not even understanding the long-term damage that they cause. They did the same with employee options scheme in their early budget, claiming they'd get a windfall of taxes. Of course it made the schemes uneconomic and they all closed down. Labor the "friend" of the worker wrecked a system that delivered the chance to share in a company's success to all workers and instead left it as only viable for executives. Sheer genius!

Morestone:

28 Jul 2014 12:29:56pm

Harry I think you will find the PRRT applies in the main to gas of which we have the proverbial bucketload.

And we have been too dimwitted to look after Australians first as the US has done. Consequently, the race for maximising exports is pushing up domestic gas prices which will drive more industry offshore.

harry:

28 Jul 2014 1:19:15pm

PRRT applies to oil, shale oil, LPG, ethane.As I've already said, the difference between ours and Norway's is essentially that we have very little oil.Agree that we should have cheap gas available for Australians, and a reserve.

Todd:

28 Jul 2014 1:39:43pm

True, Harry.

But it is the Greens agenda that will kill mining. Yes, the ALP let it happen, but this anti-mining and general anti-business sentiment could not be seen during the Hawke-Keating years. What is different between the Labor of yesteryear and the Labor of today is the Greens and the metasticising of Greens policy into ALP policy. Now business needs to look at Greens policy before making investment decisions. For example, they will be subject to Greens policy in just two short years. THAT is what will lead to investment falling off a cliff, along with our living standards.

Noah's Ark:

28 Jul 2014 11:35:15am

Ian.M.Yes the Gillard government made a grave error of judgement in the MRRT as it delivered only little in the first years of the tax to the Australian community. The resource and mining corporations indeed pulled the wool over Wayne Swans eyes and the buck on that particular occasion stops with him.

However the MRRT is now at a stage whereby all the tax deductions and write offs by the miners has now effectively been delivered and the people of Australia (I won't say the Abbott government because like the ideological halfwits they are they wish to get rid of the Goose just as it is about to lay the Golden Eggs) are now in a position to benefit from the MRRT.

We are not a nation of complete morons and idiots so as to fall for the spin of the MRRT being useless and not raising any decent amount of revenue for the Australian people as the MRRT is just about to raise substantial revenue for Australia.

Why should Australia and Australian citizens throw away maybe $billions in upcoming revenue just to appease the mining corporations which are all foreign owned and controlled anyway?

Abbott and Hockey aren't governing for all Australians but they are certainly exclusively governing for mining corporations.

We have in the MRRT PRESENTLY, the means at our disposal to easily fix any budget and revenue concerns for Australia and the so called disreputable budget emergency and any other budgeting concerns.

But no. What does the Abbott/Hockey government want to do? It wants to punish and "Target" the poor, the disadvantaged, the disabled, the aged and the young to pay for government revenue.

Todd:

28 Jul 2014 1:53:15pm

The MRRT is an investment killer. Mining investment is risky and "super profits" need to be on offer to attract capital to such a risky venture. Would you back the roughie if your odds were capped at the same price as the favourite? Of course not. Therefore, why would you invest in some junior mining company, rather than, say, the banks? Your risking of losing is far higher, but should you win, your bonus goes to the government.

But I do agree with you on the current Liberals. The latest move to make everyone work 30 hours a week for the dole, no matter what, will not save a penny (actually it will cost far more in administration ect). But it will mean even if, like me, you have contributed hundreds of thousands of dollars in income tax alone during your life, you will be made to pick up rubbish on the side of the road for 30 hours a week, then apply for 40 jobs, just to get your $250 pw. Sorry, Abbott, you've even lost me with that craziness. All that, without an income tax cut so that we can start saving now that unemployment benefits have effectively been scrapped. Seriously, apart from the independently wealthy, who would vote for that? Malcolm, gear up, because in about 2 weeks we will see polls that will REQUIRE Hockey and Abbott to stand aside. The Libs do not want to do the whole "facless men" thing, but seriously Abbott and Hockey need to be stopped. This latest move does not even save money - it just means everyone has to live in fear of losing everything at a moment's notice. Malcolm will be PM by Christmas - that is my prediction.

rusty cairns:

28 Jul 2014 6:03:19pm

GDay ToddI see the mining tax a different way to you. I see it as a way to keep some profits in Australia from Australia minerals.Whereas the miners can reduced any MRRT to be paid by reinvesting before profit.I don't see mining iron ore or coal as a risky business as the product it nearly completely ready made.Miners in Australia have a huge advantage over most other miners in other countries because there are no 4000 metre high mountain ranges or huge fast flowing rivers to traverse when transporting your product to markets.Any business that requires some one else to buy your product is a risky business. If that product only needs to be dug up and crushed into easily transported sizes you have a huge advantage over other businesses that have to manufacture a product first.One of the first iron ore miners in the Pilbara back in the early 1960's dismantled mining infrastructure in Utah USA and reassembled it here in Australia, Even the railroad less the ballast (overburden from the new Australian mine was used as ballast for the railway) originated from that Utah mine. It was the profits lost to Australia by this and other mines being developed at that time which was the reason the Rex Conner of the Whitlam government said "We must buy back the farm." Which meant he wanted Australia to have more control of profits made by it's resources not mining companies. We can complain about higher labour costs but it must remember that our standard of living is what gives the miners the sale the resource they mine. Not many earning $2 an hour buy motor vehicles and washing machines because their wage doesn't allow them to afford those items. The less of these items sold the less need for Australian mining resources.I see the McArthur river mine N.T. was in the news again this week because of environmental concerns because of an uncontrolled FIRE in their overburden ROCK pile. Just like to point out that this mine operated and profited for years before any royalties were paid.2 small iron ore miners have shut down in the N.T. over the last month this was not because of MRRT or the price on carbon. It was because they cannot competed with the big boys whom price them out of markets.The big miners of iron ore in Australia have been using the threat of "but we must compete with Brazil and Africa" since the early 1970's but have increasingly shipped out more from here almost every year.I'd like to see a super profits tax placed on the banks too.

I think I think:

28 Jul 2014 9:53:33pm

Todd, did you read the article. We are in the production phase, there will be little investment with or without the MRRT. So now we will not make any revenue after we subsidised these foreign investors.

Todd:

29 Jul 2014 11:11:02am

For certain projects. If no new projects are started within the next 20 years, then there will be few "in production" at that time. Ideally, there is a balance between start-up phase, production and shut down phase of projects. Unfortunately, the MRRT affects investments therefore there will be less in the start up phase in the coming years. Of course, a mine will not close after all the sunk cost. As I have said many times before, the State (the owner of the minerals) gets a ruturn through royalties. The Feds should only get the other taxes that should not discriminate between industries.

How does the country benefit from mining under the system prior to the MRRT? Well, firstly, there is all the income tax (company and personal) that the Feds reap. Then, of course, there are the GST impacts. The more WA gets from royalties, the less GST WA receives. Therefore, the "nation" does benefit from a successful WA mine in many ways. What benefits are derived from a mine that does not go ahead? The poorer States would see less GST if mining in WA did not exist or activity was reduced.

burke:

gbe:

28 Jul 2014 10:51:42am

Alpo: Ironically it's always government paid bureaucrats calling for higher taxes always complaining about several magnates getting rich conveniently forgetting that the public servants have far better working conditions a renumeration than the majority of workers.

Alpo:

28 Jul 2014 11:42:31am

gbe, it's not the "government paid bureaucrats" who are calling for those who earn large sums of money to pay more taxes. It's actually the People of Australia, who understand that public services need money to be financed. They appreciate the value of such public services and also understand that there are individuals and companies that can afford to truly contribute towards financing such services. It's not difficult to understand, really.The People also realise that if the Government is not able to provide services, then they will have to pay for every single one of their needs fully out of their own pocket. If you don't earn much (the situation for most Australians) then you are in very serious troubles.... For an example of this, study the social situation in the USA.

seanone:

28 Jul 2014 12:58:27pm

Good on you ALPO. I am getting really fed up with Abbott's clones and Mining Industry sympathisers getting on here and telling us that the Mining Industry is doing great things for Australia as they treat us like some colonial outpost off the 18 and 19th Century. They are very simply ripping us, destroying our environment and all to pay exorbitant salaries to their Top management and excessive dividends to their shareholders whilst avoiding paying tax at every turn. So give us a break from your spin trying to hide what you are really doing.

AE:

28 Jul 2014 7:01:13pm

So do you think that we are doing foreign investors a favour by letting them finance ventures that we lack the capital to finance in this country?If you fell that you're not getting your "fair share", buy some Rio and BHP shares and cash in......

Todd:

28 Jul 2014 2:13:15pm

No, we don't need more revenue. We need to cut spending. Where? NDIS, Gonski, Foreign Aid. Just to name a few.

Yes, this Government stinks, but that is because they are not cutting spending. And it NOT ideological. What they are doing is below liberal ideology. Ideology would say cut spending. Fine. Their moves to block the dole for 6 months while making everyone work for the dole is NOT a cut in spending - as they have (at a far higher cost) put money aside for hardship, which pretty much ALL people who find themselves out of work in the coming 2 years will qualify for. So, plenty of personal pain, worry and anguish for the vast majority of Australians, but NO SAVINGS. PPL? Don't even go there. They removed the CT, that's about it. But if you ask me if I would rather pay the extra $20 pw for CT (please no more questions re that, I go through a lot of electricity as I have 3 kids and a wife at home - sue me) rather than the fear of losing my job meaning homelessness and picking up rubbish on the side of the road. All this with no income tax cuts? What? No this Government is not about ideology. I don't know what they are about, but it ain't any ideology I have read about. They are certainly not neo-libs. They would be proposing REAL savings and real tax cuts. So far, I have seen neither.

rusty cairns:

gbe:

28 Jul 2014 12:22:48pm

Alpo: The reality is the Bureaucratic public service operate in a 1970 -80's industrial environment with politicians of all sides too timid to tackle them. With around 700 thousand federal bureaucrats for 24 million people that is simply not sustainable just imagine at the number you would need if our population was 240 million.

If the public service operated to same work standards and practices as the Australian private sector they could reduce numbers and associated costs by one third.

Alpo:

28 Jul 2014 1:13:32pm

gbe,Whether the size of our public service is too big for our needs must be determined after a serious, rational and politically neutral study is carried out for each sector. Complaining about high costs of public services, and yet sacking hundreds of ATO employees thus making our effort to raise the revenues to pay for those services more difficult, is a nonsense of such magnitude, that can only be explained by ideology, rather than pragmatism (or even common sense).When a service is required, we should raise our revenues. Rather than eliminating the costs in the illusion that such a service was not required or, if you need it, then you should pay for it from your own pocket. All this lays at the core of what kind of society we want. It's not just a matter of accounting, is first and above all a matter of ethics.

gbe:

28 Jul 2014 1:52:15pm

Alpo: I don't think many who work for $21 an hour as permanent part time with no prospect of permanency let alone the benefit of accumulating sick leave stress leave care leave annual leave long service leave flex i days and 9 day fortnights OH I forgot study leave team building jaunts and conferences not to mention workers comp with on 45 weeks full pay then 75% until retirement at 65 Would agree with you.

seanone:

28 Jul 2014 4:52:15pm

gbe I have a big problem with your constant line of bull dust about the Public Service. Point 1 Why is it okay for Business to pay way over the top remuneration to Management, something like 200% more over the last 10 years, for absolutely atrocious productivity. Measured on basis of what we have got for this namely more rent seeking, lower employment, industry that actually produces something killed off, poorer work conditions, high youth unemployment, lack of skills etc etc you would to wonder. Maybe it demonstates that paying Management more gives the lie to if you pay peanuts you get monkeys. It actually works in reverse. Point 2 We have based on OECD figures one of the most efficient Public Services in the World we are the third lowest in terms of taxes collected, in terms of Government expenditure, public servants as percentage of workers, targeting of Government transfer payments like pensions, social security etc. The fact they have managed that with the quality of Politicians we have is truly amazing.

rusty cairns:

29 Jul 2014 7:05:36am

Gday gbeWhat an odd argument you have used.Are you saying the lower paid casual, permanent part time employed would benefit if there were less well paid permanent jobs ? Mate it's senior management in the private sector that have enjoyed huge increases in salaries over the last 30 years, in some cases they have had increases of over 10 x .I use Arthur Sinodinos for example (not because he is liberal but because it was easy to search for information) and the outrageous $200.000 he was paid for a few weeks work at Australian Water Holdings. how can amounts like this be justified ?

CJB22:

28 Jul 2014 9:53:06am

Yes, the MRRT was watered down so much due to the seemingly bottomless pit of funds available for advertising by the mining industry. That is exactly the point here. Those companies have far too much power and they use that power to feather their own nests. They sure as hell aren't using it for the benefit of all Australians. Throw in a widely misleading political campaign by Abbott and co prior to the election and what could have been a long term tax windfall for all Australians has been squandered. In a different way, the squandering of potential windfalls during the Howard years when the boom times were in full swing and vote buying tax cuts were the order of the day whilst neglecting infrastructure spending, highlights how short sighted out leaders really are.

AE:

28 Jul 2014 7:07:30pm

Um, why should a company be using their profits for the benefit of "all Australians"? I don't think they ever claimed to be charities.And I really think that you have to remember that it was the colleagues of one K.Rudd who sacked him, not the mining industry.

rusty cairns:

29 Jul 2014 9:13:01am

gday AE read about Mt Todd in the N.T. Explain why tax payers in Victoria will pay for compensation because of a mine fire in Morwell.It not until next month that a report on contamination from the Ranger uranium mine accident on December 7th 2013 in water ways will be complete.How do you know these bonds are going to be sufficient ?The money Hardie had put aside for asbestos compensation was well short of what is require, I argue.

toot:

28 Jul 2014 10:56:53am

We are a nation of dills. We should have been taxing the mining companies for years. The mineral wealth of Australia belongs to Australia, and most importantly, the people; not obscenely wealthy individuals who do nothing to help anyone but themselves.

Dave In Melbourne:

28 Jul 2014 2:15:11pm

The mineral wealth does benefit all australians. The mining companies pay company tax to the feds and royalties to the states. Every state has some area of mining in it ( notably the ACT where they just mine the pockets of every other person in the country). Seriously though, how can you say taxes collected by the states and the feds don't ultimately benefit all australians.No I'm not obscenely wealthy, far from it

seanone:

harry:

28 Jul 2014 11:20:30am

According to our constitution the mineral wealth belongs to the states. They get royalties from it, and have done so for a century.Why do you people believe that imposing a large tax won't affect the amount of investment made in mining in this country? Are you really that blinkered? Just ask yourself how much tax France is getting from Gerard Depardieu. Iron Ore is the most abundant mineral on the planet.

Noah's Ark:

28 Jul 2014 12:53:30pm

harry"Iron Ore is the most abundant mineral on the planet."True harry, however just to qualify your statement. The iron ore in the Pilbara is of the highest quality of iron ore bearing deposits in the world. Quality not Quantity harry.

The miners are making $billions and they are investing only the bare minimum they need to get their projects up and running. Of course the mining corporations don't want to pay a fair tax for holes in the ground. It might cut into their profits.

As for Gerard Depardieu is he now a resident of Ukraine? Just asking harry.

BTW what is one individual who is mean about his finances and doesn't want to give back to the nation that looked after him, raised him, allow him to pursue his career through the heavily state subsidised French Cinema got to do with anything outside "gossip magazines" and disaffected wealthy individuals who will grasp at any straw no matter how ineffective in argument it is.

Really is the nation of France built and reliant on Gerard Depardieu??

harry:

28 Jul 2014 1:36:15pm

High quality iron ore is available elsewhere, Brazil's iron ore averages 62% Fe content, with its Vale mine reaching 66%. The highest grade Australian miner, Rio Tinto gets 61% and Fortescue is well below 60%.The higher the grade, the lower the costs of production and the lower the amount of pollution, hence it garners a much higher price.The main disadvantage Brazil has had has been infrastructure, but as idiotic taxes like the MRRT have diverted large scale investments to countries like Brazil, these infrastructure impediments will be fixed and even more opportunities will become possible there. We've catastrophically blown our advantage and handed it to a rival with better mining assets. The long-term effects of this will become increasingly clear as capital continues its switch from Australia to other parts of the world.

The example of Depardieu provides a simple and understandable metaphor for the effects of the MRRT. Increasing taxes sounds like a simple and effective way of increasing government revenues, but it ignores the fact that it changes the investment landscape. It also targets groups most able to change direction due to the prevailing (and likely future) economic environment. In Depardieu's case, he left France and obtained alternate citizenship. So France got 90% of $0.Large miners are making similar analyses of the Australian investment environment.

Noah's Ark:

28 Jul 2014 7:01:48pm

harry now read this post. I think this will explain the full nature of Vale's position as to its ownership and shareholding decisions. Now compare Vale with BHP Billiton and Rio Tinto and there you have the TRUTH.

BTW How many "Golden Shares" does the Australian government have in BHP Billiton and Rio Tinto??

Vale S.A. (Portuguese pronunciation: [&#712;vali]) is a Brazilian multinational diversified metals and mining corporation and one of the largest logistics operators in Brazil.[5] In addition to being the third-largest mining company in the world,[6][7] Vale is also the largest producer of iron ore,[8] pellets,[9] and second largest of nickel.[10] Vale also produces manganese, ferroalloys, copper, bauxite, potash, kaolin, alumina and aluminium. In the electric energy sector, the company participates in consortia and currently operates nine hydroelectric plants.[11]

Currently the company is listed on the stock exchanges of S?o Paulo, New York, Paris, Hong Kong and Madrid. Its ownership is documented in US SEC Form 20-A, and includes 3 "golden shares" that belong to the Brazilian government, and a significant (if not majority share) held by the national pension funds.[12] Its foreign activities are based in the Cayman Islands,[12] a noted offshore tax haven.[13]

A golden share is a nominal share which is able to outvote all other shares in certain specified circumstances, often held by a government organization, in a government company undergoing the process of privatization and transformation into a stock-company.[1]

This share gives the government organization, or other shareholder, the right of decisive vote, thus to veto all other shares, in a shareholders-meeting. Usually this will be implemented through clauses in a company's articles of association, and will be designed to prevent stakebuilding above a certain percentage ownership level, or to give a government, or other shareholder, veto powers over any major corporate action, such as the sale of a major asset or subsidiary or of the company as a whole.

harry:

29 Jul 2014 8:45:38am

Once again you are seriously confused. Vale was once a fully government owned company. It went public but left in place a number of strong controls for the govt. BHP is not and was never government owned.The government of Australia can start a company any time it wants to mine anything it wants. It hasn't.

Beyond that I have no idea what your "point" was supposed to be. Brazil didn't impose any extra conditions on Vale, it owned it, and could do what it wanted to it when it was privatised.

Peter the Lawyer:

28 Jul 2014 3:17:19pm

Noah

I bet you work as little as possible for the most amount possible. Most of us do. So what moral imperative is there for mining companies to do anything else?

It's funny how people who class themselves as 'progressive' always act as they like whilst insisting that others act 'ethically' or 'morally.' What is 'ethical' or 'moral' in this context is of course politically determined by the 'progressives' themselves for their own benefit.

I have no problem with people being out for their own benefit, What I find appalling is the crude justifications they give for doing it.

I think I think:

28 Jul 2014 10:08:33pm

Some of us arent driven by profit alone, Peter. I work harder where I am rewarded with development opportunities, achievement and healthy working relationships with my colleagues. I can do this in environments that are stable, equitable and not reactionary. I would definitely spend a lot of time looking over my shoulder were I to work with you I imagine.

Peter the Lawyer:

28 Jul 2014 3:19:28pm

Non-dequiturs don't actually help you to prove your case, they just make you look like you are incapable of reasoned argument, which I know you are not. try harder. The fact that WA lost its AAA credit rating has nothing to do with whether it owns the minerals in WA.

Bulldust:

28 Jul 2014 4:50:20pm

You might want to investigate how large proportions of the royalties earned are redistributed indirectly by the CGC GST mechanism. I could go into it at length or you could read my posts at the older blog Ian linked in this story.

TL:DNR The rest of Australia gets more of WA's royalties than we do, after the GST gets carved up to reflect the states' earning capacities and expenditure requirements. If WA kept all it's GST and royalties our state government would be running massive surpluses (based on current spending). However, I am sure the pollies would find new ways to spend the extra funds...

rusty cairns:

29 Jul 2014 9:43:25am

GDay BulldustI think you'll find there is no GST collected on exports mate ?NSW and Victoria with their large populations collect the most GST by a bigger percentage than what they receive back from the federal government too, I believe.

seanone:

28 Jul 2014 1:03:53pm

harry I am afraid you the one who is deluded. We have had a very poor version of an MRRT, designed by the Mining Industry after kicking Gillard and Swan into submission following a lying media campaign, that had absolutely no impact on foreign investment nor our World ranking as the best in the World to do business.

harry:

28 Jul 2014 1:38:18pm

Yup, no impact at all, that's why the multiple decades of Australia being the leading nation for investment in mining was lost last year. That's why mining investment here is dropping while it is growing elsewhere. Yup none at all.Sorry, did I miss any of the non-evidence you produced to bolster your opinion?

seanone:

28 Jul 2014 5:08:34pm

Long-standing US mining analyst firm Behre Dolbear last week issued its 2013 ranking of countries for mining investment. As for the last three years, Australia was ranked the safest destination for mining investment in the world, ahead of Canada and Chile.The period covered by the assessment includes the commencement of the MRRT and carbon pricing schemes.The assessment, which strangely hasn't been reported in any Australian media outlet, including specialist mining publications, stands in dire contrast to claims from the industry that the federal government had made the sector uncompetitive. In September last year, the Minerals Council of Australia released a report claiming "we have lost our competitive edge" and that there were "increasing perceptions of investment risk". The Australian Mines and Metals Association claimed in March that the Coalition was the "last hope" for the industry and that Australia was no longer a "competitive destination for investment and job creation". One mining executive claimed last year that "Australia is being priced out of the market for future investment opportunities". And as late as November, the Coalition was claiming the MRRT would "deter investment".I trust that answers your question. Just shows the validity of that old saying, that if you tell a big lie often enough the average person will believe it which is obviously why Mining keeps doing it and of course their Coalition lapdogs.

harry:

29 Jul 2014 8:50:06am

According to the Behre Dolbeare 2014 report the rankings are:The five highest-scoring countries are:Canada (62) up seven pointsAustralia (60) up four pointsUnited States (55) up thirteen pointsChile (54) up three pointsMexico (46) up three points

Seems that Canada overtook us ...Even in 2013 their ranking of Australia had us going backwards and Canada increasing.Why would they release the 2013 report in late July 2014? They released the 2014 report. You should try reading it.

Peter the Lawyer:

28 Jul 2014 3:21:23pm

It is you who misunderstand. Governments don't have to listen to media campaigns. They can and do have the power to ignore what the governed say. It is up to the government to set the taxes, not the taxpayers.

it is therefore entirely the last government's fault that the mining tax was emasculated.

AE:

28 Jul 2014 7:10:23pm

Well if Swan and Gillard are that weak that they allowed themselves to be "kicked into submission", as you put it, then that is their fault for being weak and failing to sell their side to us citizens.We are so much better off without them.

whohasthefish:

28 Jul 2014 1:20:46pm

Did you not read the article harry. Once again we find LNP spin merchants not bothering with the facts just spinning ideology which has proven to be flawed. Just where has the reduction in investment you talk of taken place?. Record outputs and continued massive profit by the industry prove your claims to be false. You should go back to the water cooler and discuss your next spin attack because your post is an embarrassment.

Oversupply is and always has been a problem in the Australian mining industry because sustainability runs a poor second to the short term profit mentality of overseas investors. That's how the industry works. Invest, reap and pillage, move on to the next investment. I have worked in the mining industry all my life and anyone with any knowledge of the industry will tell you, no matter how productive employee's are, no matter how efficient the process, oversupplying a market, like all markets, causes the majority of closures.

The mining industry should be concentrating on opening up new markets, India for example, rather than writing 'self interest' policy for our, I repeat OUR government.

harry:

28 Jul 2014 3:49:46pm

I think you need to understand the difference between production from existing mines and further investments. BHP's production is from existing mines. The loss of investments if for development of other mines. Two different concepts. Perhap you should follow your own advice and actually read what other have posted before launching into criticisms.

Basic economics:

"Why do you people believe that imposing a large tax won't affect the amount of investment made in mining in this country?"

Well, its because the tax is imposed on economic rents. See, when economists talk about profits, they don't talk about the same thing as accountants.

Economic rents are earned where the return on an investment is higher than the amount that would be required to justify that investment.

Did you catch that? Yeah - the mining tax applies to the portion of profits over and above the profit required by a mining company to maintain its investment. That is, the company, and thereby, its owners, make their profit that gives them an acceptable return. Then they make more money. Its that money rent taxes like the MRRT and PRRT tax.

In this way, imposing a rent tax doesn't affect the level of investment because the returns available are still - even if the tax rate was 99% - in excess of the returns required to justify that investment.

The problem is that people like yourself leapt to a conclusion (big tax = less investment) without understanding the fundamental principles at work.

burke:

28 Jul 2014 3:48:28pm

Fine, but the super genius in Canberra said that mining was risk free and anything better than 5% was a super profit. He really said that! I didn't see you rushing to invest in mining for a 5.1% return!

Bulldust:

29 Jul 2014 9:16:18am

The uplift rate that was agreed upon was LTBR +7% IIRC. Hardly 5%. Of course, that was after the negotiations with the big three miners.

As an economist I think it is amusing that some economists think things which are elegant in theory will ever be implmented effectively in the real world. Rents and efficient markets are two things that make me giggle. It is a triumph of ideology over pragmatism.

There is a reason states use ad valorem royalty rates ... they work, they're simple, and transparent. Rents are complex, hideous to implement, and the revenue streams are much more volatile (if they exist at all LOL). The only people that are infatuated with rent taxes are theoretical economists and the people that fall under their rhetoric spells.

harry:

28 Jul 2014 3:56:38pm

It seems this is all to complex for your to understand.

A mining investment is a long-term, multi-billion dollar investment.Claiming that your tax will only affect "winners" means that the effect is the same as saying to investors, come to Australia and risk large sums of money on the hope that it works out really well. Of course if it does, we'll tax the crap out of you. And if it doesn't you lose.

What an awesome prospect! You should get a job in sales.

Needless to say the investors decide instead to go somewhere else, where success on a risky investment isn't going to be capped. You do understand that Australia isn't the only place that miners can invest? Don't you?Better go back and do those basic economics course again, you must have skipped a very important class.

OUB :

28 Jul 2014 5:11:01pm

You are confusing yourself Basic. Mining is a very volatile industry. The returns can vary substantially year to year. The idea that 6% or 15% is an adequate return to induce major miners to commit billions of dollars in developing new mines and infrastructure in remote parts of the country over the course of say five years when countries such as Canada are happy to offer much more attractive tax regimes and a more business-friendly environment (unless you are BHP) is not well thought through. I expect the miners would need a few good years to justify the expense and high degree of risk for such ventures. The idea that the Commonwealth can suck all the juice out of the good years and leave the miners to survive as best they can through the much more frequent lean years needs further consideration on your part.

Todd:

28 Jul 2014 5:31:14pm

But by your logic, it means that the "allowable return" is determined not by the market, but instead by some ATO bureaucrat. What should the allowable return be? I would have thought that it should be determined on a project by project basis according to the relative risks of particular project. I would have thought basic economics covered the whole risk and return relationship. Giving different treatment to mining profits will of course affect investment. As if we made mining profits tax free, then that would distort the market by attracting more investment. How about this idea? ALL companies pay 30% of their taxable incomes. Wait a minute...

Bulldust:

29 Jul 2014 9:11:44am

Wrong. Sorry, but coming from someone with an intimate knowledge of mineral economics, increased taxes, regardless of type, are a disincentive to investment.

In theory a pure rent tax does not change the output decision, because all tax is imposed past the theoretical economic break-even point. However, it will change the decision whether to invest or not, because it lowers the overall return of the project. Therefore, projects that are marginal without a rent tax become sub-marginal after a rent tax and never get built. It's rather simple really.

whohasthefish:

Harry. I read the article. Did you? The crux of the article is that the demand for iron ore is not as strong as it was resulting in a lower price per tonne as expressed in the authors words...

"They now are in the process of churning out ever greater volumes to make up for lower prices, a strategy that only serves to further depress prices, just as demand growth in China has slowed."

and

"At some stage, the pressures will become too much to bear. There will be mine closures and corporate collapses...."

The point being it is no use opening new iron ore projects if the market is already saturated, a point investors are quite savvy too. The MRRT only kicks in after a substantial profit margin is realised. Whilst a small contributing factor, it is, by no means the determining factor for new investment.

The MRRT does not and never has been responsible for investment strategies. Whether their is enough market demand, both present and future, at a profitable price is the determining factor. An investment needs to be first profitable before any dreams of super profits are realised. Asking investors to share in the super profits if they come does not reduce normal profit levels.

If the market becomes saturated, which is what the author suggests has already happened then the price plummets and many enterprises become non profitable as has been the case in the past with Tin, Zinc, Silver, Copper, etc... and to a certain extent Gold. (It should be noted that once a project is not super profitable the MRRT is zero).

An oversupplying strategy causes Mine closures and community disruptions that requires Government money for retraining and relocation of workforces. This has become the norm for mining communities throughout Australia.

Its a balancing act that requires a sometimes lower level of production which sustains a higher demand (price) over a longer period that is best for a sustainable industry, smoothing out he ups and downs.

Simply building more and more mines without giving consideration to the long term effects of such a strategy is a simplistic and stupid approach. It will bite us on the bum in both iron ore and coal well into the future and is poor planning and just represents pandering to the short term profiteering of multinationals.

Other industries have suffered similar problems, just look at what happened with wool in the late 70's.

Like I said you should actually read the article before sprouting your partisan spin.

OUB :

28 Jul 2014 8:00:19pm

When you acquire a bit more life experience fishy you will realise that just because a partisan journalist writes something in a blog it doesn't make it a fact.

BHP and Rio's expansion plans have been in place for many years. They have now largely come to fruition. They aren't mining more because prices have dropped, they are mining more because they built up production capacity and are now looking to exploit their resources on a larger scale. This will have an impact on prices but prices are the result, not the driver.

Fret not, mines are regularly put in care and maintenance mode when markets go soft. The world keeps turning.

You fail to appreciate the time and planning that goes into developing and expanding new mines. This process is not flicked on and off like a light switch. When miners had a massive new tax dropped on them after they had made huge investments based on a different, less onerous tax regime it scared the hell out of them. They reevaluated the mines they had in mind and largely stopped the early stage ones. How many recommenced I don't know but I'm sure many would have backed off to see how things panned out over a number of years.

How can you not see that the government seizing a big chunk of revenues will affect the viability of a project? True the MRRT was better than the mad RSPT but it changed the prospective future cash flows just the same. To be fair the impact was uncertain but uncertainty is toxic in investment.

Please tell us what are normal profits when it comes to mining. You seem to have no concept of the volatility of those profits. We've had some good years as far as prices go but they follow on from decades of sub-economic returns. Soon enough the downtrend in prices will reassert itself. But you think you can justify theft from shareholders in the good times and ignore them in the tough times.

More likely responsible miners will look after their own rather than rely on fickle governments. And many of the FIFO workers won't need to rush back to work or conform with government dictates. Their skills will often find a use in building infrastructure or construction. Best you don't pretend to care anyway.

Simply building more mines without consideration for the future will get a board of directors tipped out fairly quickly. They are responsible to shareholders and generally take that seriously. As for planning who is the genius in government that you think has a better grip on the future of the global industry than the people putting their capital on the line?

The wool industry got into trouble due to excessive intervention (price stabilisation schemes). Yet you want more government intervention in the mining industry. Inconsistent?

Reading articles is one thing, appreciating the weakness of the arguments another. Apparently you just disagree with Harry's partisanship but can't see your own.

Sharynl:

29 Jul 2014 8:13:19am

In my opinion they can make all the profits they like. What they should not be allowed to do is pollute with impunity. Our Great Barrier Reef is off limits, figure out another way to get your product to market. Our groundwater should be sacrosanct. If you cannot mine a product without filling the air with toxic substances then leave it in the ground. We should not be willing to prop up our standard of living in the short term at the expense of our climate. Many Aussies (thanks Grandad) gave their lives in wars to give future generations security, yet we are unwilling to admit how selfish we are chasing illusionary wealth at the expense of our children. Is it really that hard to understand that the present economic models for exponential growth on a finite planet are fatally flawed.A greenie and proud of it!

harry:

29 Jul 2014 9:03:42am

So Sharynl what industries would you allow. Since they aren't allowed to produce CO2 (which will eventually be sunk), or use water (which will eventually return as rain). That doesn't really leave much.How much lower a standard of living do you think is acceptable for Australia so that your idea of economic policies can be put in place?

OUB :

Noah's Ark:

28 Jul 2014 7:19:33pm

Norway does a pretty good job and its government revenue is far above ours. Norway also provided the best social dividend on the planet and Australia could of followed suit.

However with the mantra of the Abbott, Hockey LNP nasty, free market (I mean monopolised corporate market which takes all profits outside Australia in this particular case mining. With mining we in Australia could of imposed even a slightly imitated process such as Norways and we would ALL be siting pretty), subsidising anti Australian and pro only wealthy residents is bad news.

Instead we have a divided society of haves and have nots further imposed by Neo Conservative ideology of user pays and those who can't afford to pay will have to suffer.

The whole concept of "Choices" by individuals (as the Neo Cons like to express it) is nothing more than an anathema to the society in which people are supposed to live in harmony.

Noah's Ark:

28 Jul 2014 7:29:37pm

I can well remember "Telecom Australia" before it became "Telstra" and was privatised. Telecom Australia was an efficient and a well managed publicly owned organisation that went the extra mile for all customers. It had a charter to provide services to one and all on a equal basis. Wether you lived in the cities or regional or even outback Australia. Wether you were wealthy or poor the economic discrimination was not an issue. Also it provided a continuous revenue stream which was set to do nothing other than increase over time.

Then came Howard. Then came the half pregnant BS. Then came the mums and dads shareholding BS. Then there was the lie with the shareholding of the Howard government selling something that was owned by all Australians in the first place.

Then came the Telstra we now all know and all the other leaching telecommunication corporations which are not in Australia as a nations best interest but that of the CEO's and shareholders whoever the hell they may be.

OUB :

28 Jul 2014 8:11:27pm

Nah mate. I remember talking to a Telecom installer (whatever they were called) back in the eighties. He was boasting that they spend a couple of hours doing connections for Telecom and then spend the rest of the day doing their own business - making connections for people willing to pay to get around the month's long Telecom backlog. Caused by installers doing heir own work for most of the day no doubt. It was a giant rorting machine dominated by unions. They had to privatise it to make it efficient.

Blzbob:

28 Jul 2014 11:40:57pm

Providing monopolies are owned by the people (the government) and profit are going into government infrastructure or into improved infrastructure then that is fine, but when ever private companies chose to compete with government owned businesses they cry foul.

Rick:

28 Jul 2014 12:52:58pm

In fact the tax raised many cents, many dollars in fact but not as much much as the original design intended and not as much as the Australian people deserved. We do now who the dills are - those who fell for the mining industry add campaign.I always find it passing strange that those who oppose the tax as being a massive burden on the mining industry always want, at the same time, to tell us that it raised no money. How can something that raises no money be a burden?

whohasthefish:

28 Jul 2014 2:21:35pm

You have hit the nail on the head Rick. Massive burden and raises no money at the same time. An oxymoronic argument if ever their was one.

Its the same as the LNP's whole budget position. They tell us we have a budget emergency yet they massively reduce the revenue stream with the repealing of the MRRT and price on carbon and increase spending by $5.5billion on a paid parental leave scheme no one likes. Beggars belief.

The proposed PPL scheme has its own oxymoronic bits. Mums, but not dads get it. It is designed to financially help with the bills so mum can spend time at home with bub yet dad time, well that's unimportant. Its also designed to give the most assistance to those who require the least assistance. Another oxymoronic position.

Their carbon pricing policy is another. Climate change so we are meant to believe is not a problem, its crap, yet we will spend $2.5billion on direct action to combat climate change.

The carbon tax was the cause of massive price rises, yet now its gone, we will only see small price falls, if any.

Now they want dole recipients to apply for jobs that don't exist or otherwise if you have no money and can't get a job simply move interstate.

On and on it goes. Seems we are being governed by an (oxy)moronic government led by morons.

Rodf:

28 Jul 2014 6:32:50pm

The dills are the ones who fought for a mining tax based on profits from an industry that can profit shift offshore to avoid paying anything. What we really need is a tax on the amount of ore dug up, regardless of the profits made so that the tax base is secure - oh wait, we already have that, its called royalties and the mining companies all pay it.

Can't believe these dills are still rabbiting on about an ill conceived tax that failed at every test when we have a perfectly good mining royalty system in place and have had for the last 100 years. If the rates are not high enough, they can be increased. We don't need another overcomplicated tax that blind Freddy can avoid.

Stuffed Olive:

28 Jul 2014 9:26:17am

I noticed those BHP production figures and also the declining price. Thank you Ian for this overview of the situation. I think we have too many mines and I agree that some are likely to come a cropper.

Stuffed Olive:

28 Jul 2014 10:10:11am

Yes barsnax and there are still twits here blithering on about profits staying here because there are shareholders who are Australian too. They really know bugger all and they support them with dumb words just because Abbott says so. i despair.

Noah's Ark:

28 Jul 2014 1:07:43pm

Abbott continues to compound the myth that somehow BHP Billiton is Australian. While on his visit to the United States at the New York Stock Exchange on Wall Street he stood in front a graph showing BHP Billiton and in his garbled voice asked the broker something about BHP to which the broker replied something about the share price of BHP Billiton should improve latter in the day's proceedings.

A photo op by Abbott designed to keep the story going and mislead Australian citizens about the true ownership of BHP Billiton and why Australia should not support anything designed to help revenue for all Australians by these miners by employing visual subterfuge.

burke:

Noah's Ark:

"Meanwhile you ignore the fact that most of those profits are reinvested in Australia."

Show me any evidence of the profits being reinvested into the Australian community by BHP Billiton or Rio Tinto.

These miners only invest the bare minimum they have to in order to extract the profits they make for their shareholders (read London residentals) and the CEO (not Australian citizens as far as I have known). And then add the subsidies and tax write offs they get as if they are agricultural producers which they certainly are not and do not give back anything of the profits they can take out to the max.

At least Vale in Brazil has three "golden shares" owned by the Brazilian government. Vale is also Brazilian owned. Now compare that to BHP Billiton and Rio Tinto.

Mike (the other one):

28 Jul 2014 11:12:48am

Agree with that barsnax. The furphy of foreign investment had Ford, GMH etcetera invest in Australian manufacturing and now that it doesn't suit them they are walking away - if we had developed and owned our own car and truck manufacturing industries the story might be a different one. The same goes for real estate; we allow foreigners to buy our real estate but try doing that in some other countries like China. Retaining ownership and control of your real estate is probably the single most important economic asset/ position you can have.

Did I hear somebody use Australian politician and dill in the same sentence?

Jimmy Necktie:

28 Jul 2014 5:44:16pm

"The furphy of foreign investment had Ford, GMH etcetera invest in Australian manufacturing and now that it doesn't suit them they are walking away"

We *paid* them to invest and when we stopped paying they stopped investing. Do you think the gubberment declared at some point "we will not make our own cars" and lo it became so? We don't make our own cars because it is not profitable to do so. You want to make cars then find a way to make it work and go make a fortune. Nothing stopping you.

Noah's Ark:

Jimmy Necktie. "You want to make cars then find a way to make it work and go make a fortune. Nothing stopping you."Of course. I'll just waltz down to one of the big banks. Problem solved.

It takes huge government help, government support and government investment to get an industry like that off the ground just to start. We can't even get an NBN out of the Abbott government. What do you expect from the Abbott mob?.

harry:

28 Jul 2014 11:22:27am

The only reason foreign investment is able to do this is because there isn't enough local investment. Its not like locals have been barred from doing anything that the foreigners are doing. Have you ever invested in a small Australian mining company?

Stuffed Olive:

28 Jul 2014 11:56:48am

The only reason is that 'they are allowed to'. Local investment is not the point if you note that what they often do is buy an existing company - BHP is no longer Australian. So many of our manufacturers and businesses have been bought, not established. The foreign mining companies companies coming in just gobble up the easy pickings. Too many locals just sell out because they like the money. It's like the stupid greed of governments flogging off our utilities and other assets for short term gain but long term loss.

harry:

Peter the Lawyer:

28 Jul 2014 3:37:18pm

Funny how you worry about nationalism in economics but not in any other spher, S.O. Aren't you ALP supporters always wanting more world governments and external treaties? Yet when it comes to private enterprise you are all ultranationalists.

There are plenty of Austrlaian companies and businesses out there. In fact Australians also substantial investments in other countires.

Peter the Lawyer:

It's interesting to see how utterly nationalistic and racist you ALP supporters are when it comes to foreign investment.

It has always struck me that the least racist people are the elites, because we live in an international world where most of the people at our level in other countires think in a simila way to us.

Thye fear and paranoia about foreigners and the 'other' really festers in the less elite parts of society, who are scared of profit making entities in general and who think that somehow the world owes them a living through massive wealth redistribution.

I get the impression that these people don't understand that labour depends upon capital.

Noah's Ark:

29 Jul 2014 1:26:05am

"Peter the Lawyer"It has always struck me that the least racist people are the elites, because we live in an international world where most of the people at our level in other countires think in a simila way to us."

There is absolutely no way you can substantiate that claim excepting that money and wealth are absolute and therefore all people who cannot have access to appropriate wealth are by your definition much more racist simply because they have small or nil bank accounts . Let alone own share portfolios, work as high paid lawyers or are CEO's and the like.

Well summed up Peter. Of course the wealthy won't discriminate if it is going to interfere with their profit taking.

the yank:

28 Jul 2014 10:30:41am

There was always going to be a decrease in investments in mining infrastructure. The entire point of the investments made over the last few years was to be able to increase production to a level that the miners thought they would require to fill the customers needs.

What we are expected to see now are yes lower prices but because of an increase volume of trade an increase in profits. BHP is loaded with money. So much so they are thinking of a massive buy back scheme.

That this business is a company eat company thing should surprise anyone either that is the nature of capitalism. It's the nature of the beast.

harry:

28 Jul 2014 11:24:20am

Strangely the amount of mining investment world wide is still increasing, it just isn't coming to the former #1 destination, Australia. Perhaps they are worried that the current opposition might gain power and enact its policy of imposing extra taxes on miners and are happy to invest elsewhere ...

whohasthefish:

28 Jul 2014 10:11:49pm

Keep deluding yourself harry. We just keep building mines eh. Don't bother opening new markets. If we built it the they will come I here him say. Can you no get the fact that China's growth is easing. LNP spin with absolutely no thought to the future.

The minerals are managed by the governments of Australia on behalf of the people of Australia, therefore it is only right the people benefit from its exploitation. We are now moving into the production stage therefore it is only right we all share in the profits after fair compensation for the investment. That share is determined by our government, as it should be and not the boards of foreign companies.

I have my doubts that the LNP are actually operating in Australia's best interest on this matter. The question that must be asked and answered is whether the LNP have sold us out for political donations and political campaigning. Its a serious question and I must say the suspicion is warranted.

To claim a budget emergency and then to reduce a valid and substantial revenue stream is an illogical position. Logic tells us that something else is at play. Either we have a budget emergency and we need the revenue, or, we have no emergency and the austerity measures are unjustified. Either way someone is telling porkies.

Noah's Ark:

harry "Strangely the amount of mining investment world wide is still increasing, it just isn't coming to the former #1 destination, Australia."

Excluding oil and gas harry what mining investment are you talking about and where?. I would like to be informed.

In any event either the economic system will fail or the planets environment will just pack it up? I'm not sure which one will happen first but unsustainable growth will have its limits on a finite planet. Unless that is we as human inhabitants of this planet can go down a Green path and Green economics.

I am firmly convinced and so is any other person that cares for the planet and all of its life forms that only vested, wealthy, powerful and existing multinational corporate interests and their apparatchik politicians are the only ones who really believe in the current unsustainable economic growth at all costs economic systems.

I will go to my grave being judged on my actions and objections and beliefs and lack of greed and I do not conform to any organised religion but I am and feel spiritual and love the planet , not hate it as an adversary to be used up as a commodity for profit. .

Blzbob:

28 Jul 2014 11:29:21am

Too many eggs in the one basket, and now half of them have gone rotten and the others are getting stale.It's not going to be a vary pleasant omelette, and out economy is headed to being a basket case as a result.

South of Saturn:

harry:

28 Jul 2014 11:27:32am

Norway has a petroleum tax. So do we. The only difference is they had more oil/gas than we did (it's running out) - tax taxes are very similar in both countries.Oil is scarce, there aren't alternative investments.Attempting to use the Norway experience without understanding the fundamental difference between a scarce resource and the most abundant mineral in the world (iron ore) is rather daft.

harry:

28 Jul 2014 1:40:07pm

You don't seem to understand, we have almost exactly the same petroleum resource rent tax as Norway, and we've had it for decades.Norway doesn't have it for any other minerals and neither should we.You have absolutely no idea what you are talking about.

Basic economics:

28 Jul 2014 1:56:03pm

Attempting to argue against the comparison with Norway without understanding that an economic rent is entirely independent of the relative scarcity or otherwise of how it is earned is also pretty daft.

Norway did not have more gas (although it did have more oil). The main differences in the experiences were that the Norwegians recognised the limited nature of the resource and were prepared to institute a whacking great tax on the rents earned from it.

You might also have mentioned that the Norwegians sensibly chose to institute direct government ownership of its resources (ie Statoil) rather than allowing most of its resources to be bought and exploited by companies who subsequently shifted the profits elsewhere.

And what do the Norwegians have to show for this dastardly act of almost pure socialism? A sovereign wealth fund Australia can only dream about, that's what.

Bulldust:

28 Jul 2014 4:58:34pm

Let me fix that for you ... "shifted the profits elsewhere after paying all the state and federal taxes and royalties."

Nothing to stop Aussies investing in our resources, except reluctance, or perhaps sensible portfolio diversification. Given that we are now net overseas investors as a coubtry, clearly everything could have been domestically funded, but only an idiot puts all their investment eggs in one basket. Consequently it is inevitable that some portion of the mining companies will be foreign owned, and logically some of the profit, after the aforementioned taxes and royalties, go overseas. The proportion depends entirely on how much we care to invest in our own domestic industry.

Does anyone see any fundamental problems with this state of affairs? Are we just mindlessly railing against foreign investment?

Ruby and Bella:

28 Jul 2014 10:01:10am

Dear Mick, did you read the bit about a buy back for London investors but not Australians. Why on earth would anyone but shares in a company that uses our mineral wealth to make other country?s investors wealthy unless they are a dill? Unfortunately our superannuation probably invests with these miners making us dills as well. We are going to have to have a chat to the super mob about dumping investment in coal perhaps.

Local investors get that and fine return it is too, so locally we do still get a good deal and it remains a good investment.

Yes, please do dump your investments in coal, then those holdings will elso end up overseas where investors are not driven by emotion but by principles (Commerce) and of course in a few years time, they will do what BHP/Billiton is doing, using tax effective instruments to make money where they can.

if Australians stopped being so outraged and offended by everything that isn't rewarding them personally we'd all be able to be richer and fund our own retirements.

By the time you divest yourselves of everything you don't like, that your friends don't like, that Christine Milne and Bill Shorten don't like, that Fairfax and the ABC sneer at .. you'll be scratching for an income .. while watching all the hypocrites who talk a big fight but keep one hand firmly in the pie.

Please do be principled in your own way about investing, and be prepared to be poor, your decision of course and I'm sure you'll feel morally superior, as you watch everyone drive past you at the bus stop in their new Mercs.

Oaktree:

28 Jul 2014 11:03:28am

I would advise anyone with mining stocks to talk to their advisor's before doing anything rash. Any rush for the exit with BHP for example will impact on a lot of self funded retirees, who are avoiding the welfare system to Australia's benefit.

I am not an expert, but I do wonder at the "investor sentiment" that plays havoc with the share market at times.

Share prices are part of the equation, but so are dividend receipts - and capital gain for sellers.

Although they say you should never invest in the share market unless you can afford to lose, I am afraid that even many super portfolios disregard this advice.

harry:

Ruby and Bella:

28 Jul 2014 1:38:12pm

Less shares greater the their value. Great stuff if you are a company executive whose compensation is linked to earnings per share targets. Not so good for small investors that may be selling their stock short. Not sure how that will help Australian investors unless it drives the price up a bit. Open to suggestions Harry, stock market gurus we are not.

OUB :

28 Jul 2014 5:30:03pm

That is one of the sillier parts of a rather naive piece from Mr Verrender RnB. The reason that shares in the UK halves of the two dual listed companies are being bought back and not those of the Australian entities is that the PLCs are cheaper than the Ltds. The idea of buybacks is to boost the earnings per share of the remaining shares. It would be irresponsible of directors to buy the expensive Ltd shares when there are cheaper shares on offer.

There is some formula that splits the earnings of the two groups between the two DLCs. Adjustments are made to divert more earnings to the Ltd companies after these buybacks.

I can't explain why there is the price differential. Part of it is to do with liquidity. Perhaps there is more choice in mid-size miners on the UK market. Perhaps the prominence of mining in our market means mining is better understood here or perhaps the Poms have a dimmer view of the outlook for mining. Do what I do, make up your own excuse.

orangefox:

28 Jul 2014 10:25:06am

The minerals should be owned by Australia but it seems people like you think they it is OK that the mining companies, most foreign owned, own the minerals.What should happen is all leases should be reclaimed by the government and then the government extract the minerals themselves with the proceeds going to all ALL Australians, not just a few fat cats, like Gina, etc.It won't happen I know, but the general public only gets a small reward for the massive resource wealth of this country and it's now too late to correct this. The loss has been going on for decades.Our reputation as a 'country of dills' has been confirmed.

cangaiman:

28 Jul 2014 11:42:02am

Mick - I wonder if you know how it works? You could always ask those poor farmers at Collinsville Qld. They didn't sell their farms. The neighbouring coal mine - after gaining their approvals by assuring all and sundry they would not operate within 1 km of the creek- lodged an expansion proposal to divert the creek and mine the creek bed. Those farmers didn't sell their land, but they don't get the benefits, all they do is lose their source of water ( their livliehood).That may be how commerce works, but please, explain to me how that is a good thing? What makes a coal mine more inportant than a farm? Why should a mutli national prosper at the expense of a local? Might be good to you matey, but to me it stinks.

orangefox:

28 Jul 2014 12:06:18pm

mick,Most of these mining companies have tax minimization schemes and some don't pay tax at all.Mining is not a big employer and it us becoming more automated.I understand how commerse works and I see how the majority of Australians and Australia has not benified sufficiaintely from these mining booms.Australia should have a HUGE trading surplus due to our natural resources.Instead we have an ongoing trading deficit.If the Chinese were running this country Australia would be a global superpower.

Peter the Lawyer:

28 Jul 2014 3:59:00pm

Commerce isn't here to benefit people who have no part in it.

Where do people learn these extraordinary socilaistic notions? The chief aim of commerce is to allow people to trade together to their mutual benefit. There has to be limits placed on that trade so as to ensure that others are not harmed. However, that doesn't turn into a positive obligation to make sure that others outside the transaction actually do well from it.

Where do such playground notions arise? Are our schools teaching this babyish stuff?

The zero sum fallcy seems to be a real favourite of the educational establishment these days, along with the sophist problem of complicating issues that are simple and simplifying issues that are really complex.

Peter the Lawyer:

28 Jul 2014 4:04:17pm

If a company pays no tax, that means it didn't make any profit for tax purposes. Remember that tax profit and accounting profit are different. SO when you hear some greenie telling you that a company paid anything less than 30% tax, you know that the accounting profit is being used not the tax profit.

If it wrong to make taxable profit something less than accounting profit then that's a problem with the tax system not with the mining companies.

I think it isn't wrong, because the tax system and the accounting principles are seeking to measure two different things. The former really looks at the expense of doing buisiness that may not be caught on the profit and loss acount. hence depreciation is a huge deduction, but is really capital rather than revenue spending. It is thus treated differently for tax purposes than it is for accounting purposes.

Bulldust:

28 Jul 2014 5:02:52pm

Orange... let's see some evidence for the first statement. I see the billions in mining royalties rolling in, explain how that is a dodge please? Stamp duties, payroll tax, licence fees, rentals, income tax ... excuse me, but how are these dodged? In the immortal words of Pauline Hanson, please explain?

more than that:

28 Jul 2014 10:49:17am

I once watched a Lateline report a couple of years ago where a senior mining executive said the Australian "government releases the resources to the miners".So really we are a country of generous and naive dills.

harry:

28 Jul 2014 11:31:23am

Alternatively Lateline isn't a reliable source of information.The Australian constitution grants ownership of mineral resources to the states. Miners pay the states royalties. The federal govt doesn't own the resources but has some environmental and foreign investment controls.

Bulldust:

28 Jul 2014 5:10:11pm

Sorta right, but for the wrong reasons. The Constitution does not mention mining, resources, minerals etc. where it is silent the laws and ownership falls to the Crowns of the respective states (there are multiple concepts of the "Crown" in Australia).

Consequently, as you rightly assert, ownership of the resources is with the Crown of the respective state, which is represented by the State Governor, but for practical purposes the elected state government. It is therefore up to the state governments to determine how minerals are sold on behalf of the people.

If the population of a state kicks up enough stink, then I am sure the respective government will be happy to increase royalties, for teh sake of argument.

I have no legal background, but the basic gist above is closer to an accurate representation of the mineral-state ownership thingo. Interestingly states are not supposed to levy excise taxes, but most state royalties are in the form that resembles an excise. I doubt anyone really wants to tackle this issue as the lawyers would be the only winners. Those QCs with the fancy wigs cost big bucks.

Blzbob:

28 Jul 2014 11:32:47am

Yes it was effective, at encouraging investment and expansion.But it did need some tweaking, and now is the time to do it.simply removing it just as it is about to deliver would make us even bigger fools than not introducing it in the first place.

mick:

Dear me, you sound like the victim here don't you, surrounded by scoundrels and fools

Well, your life decisions may have put you in that frame of mind, but some of have done very well and our children and grandchildren are very proud of our accomplishments.

There's bucketloads of resources and the environment is just fine, it's not like we haven't legislated protections in all directions is it?

One thing they do laugh at is the tying up of natural resources like rivers we could dam for water and electricity and then building desal plants, that require energy to run .. how incredibly gullible were the fools who did that to listen to the carpetbaggers .. oh Labor, well, say no more!

joking right:

capewell:

Probably because the media finds it an easier story than the daily toll of massive coal burning alternatives.

These continue while we link hands around the campfire and sing songs of solar and wind that will take forever to deliver.

Neither Chernobyl nor Fukishima ended the world. Australia has vast tracks of geologically stable land, the raw materials and the technological capability. But we will continue to burn brown coal and make token renewable efforts.

Caffettierra Moka:

28 Jul 2014 11:08:07am

This is the most arid place on Earth (outside of Antarctica). There is never going to be enough reliable water on the mainland to make hydro a possibility. It is also one of the big problems with nuclear as well, no chance of building them inland as they require water - build them on the coast and you will find a lot of resistence to the concept.

In your enthusiasm to proclaim that resources 100% to go and environment 100% just fine you overlook the very simple fact that this nation just doesn't have the supply of fresh water it needs. Soon, we are going to have to make decisions about whether it goes to the mines or the farms or the cities. I don't trust the Coalition to make a rational decision about anything, let alone food and water security. A mining magnate waving a fistfull of cash at them will get their attention faster, we saw it happen when Clive was in the big tent with them.

OUB :

Caffettierra Moka:

28 Jul 2014 6:39:15pm

I acknowledged that. But I also pointed out that you won't get anyone to build them on the coast. That is 'prime real estate' and no-one wants their holiday homes taken away. Developers want to parcel it out in nice expensive lots, not lose an entire chunk. And it is not like anyone's gonna want to holiday within 20 kms of a nuclear reactor?

Blzbob:

29 Jul 2014 12:01:13am

No they still need pure fresh water, although the fresh water can be cooled using sea water through heat exchange units, but then those units are prone to failure due to damage by the corrosiveness of the salt water, which is dangerous in itself and therefore expensive to avoid.

Stuffed Olive:

28 Jul 2014 11:42:52am

Just because there is a river it does not follow there can be a dam or a sizable dam. Brisbane River goes through heavily populated area,Mary River doubtful, Mitchell goes into a lake already and there is no valley that I can see. You'd better discuss this with a dam builder or two and come back with an assessment.

Blzbob:

28 Jul 2014 11:54:15pm

LOL dam the Brisbane river and all you have is a huge shallow evaporation pond.Almost all the best places to build dams have already got dams, unless you just want to destroy more of Tasmania's forests.

Blzbob:

28 Jul 2014 11:38:50am

Half of us baby boomers are already cursing the other half for squandering the resources and the environment.It isn't the children of parents who had large families that are doing the damage, it is the children of wealthy families that are being driven by pure greed that are doing it.

Blzbob:

The resources left in the ground are like money in the bank, they can be used at a sustainable and non environmentally damaging rate, and they will return a greater value when used wisely.

Coal will be essential for the smelting of various types of ore for a long time into our future, so why are we wasting it on generating power for things like heating and cooling our homes, and lighting up billboards? Seems pretty dumb to me.

Peter the Lawyer:

28 Jul 2014 4:09:32pm

What I think you don't understand is that the leaders of society are not political leaders, but leaders in business, the law, the media, the sciences and the arts.

Asutrlaia got plenty out of the mining boom. The real reason we have to balme the baby-boomers is that the lefties amoongst them are so political and want to take our freedom away whilst making things worse for the disadvantaged. Those are the baby-boomers you have to worry about, the idiotic left-wingers who can't understand how things work and who hold onto to their envy of others as a gospel that justifies any evil you can name.

tom:

AE:

28 Jul 2014 7:54:45pm

How about the guvvamnet bans that rotten "foreign investment" altogether. Then, we will all get our fair share - of zero, because we lack the capital in this country to make all of these projects happen. And then we can all feel good about keeping that rotten foreign capital out, yeah!And how about we ban the banks seeking foreign capital to lend to us so that we can buy stuff beyond our means? Yeah, that's one way to solve our current account deficit.

Alpo:

28 Jul 2014 9:33:42am

Solution:

a) Get rid of the Abbott Government asap.

b) Re-introduce a much beefed up MRRT targeted at the high profits of the big multinationals.

c) This will achieve two things: i) increase government revenues to finance other important infrastructure programs and for the provision of public services. ii) Decrease the competitive pressure on the small mining players, thus ensuring their survival.

d) If this is not done, then the big companies will become the monstrous companies, thus transforming themselves into "untouchables" (or even more untouchables than they are now) .... to the detriment of the People of Australia, the ultimate owners of our mineral resources.

mick:

b) who will introduce it? Labor? oh please, we need people who have a clue not that mob of Union hacks who think government is just about spending.

c) It will not achieve what you want, there is state legislation rights in the way. Like Labor, you have no idea how this all works do you? Just another greed driven spender of other people's money

d) Utter rubbish, we make a lot of money out of companies in Australia, even big ones. The myth that big companies pay no tax and "steal" from us is just that, a myth, easily sold to the Labor faithful.

Stuffed Olive:

28 Jul 2014 12:06:10pm

Mick - who will introduce it ? - any responsible Australian government, that's who - and one not in the pockets of mining companies. Some pay tax and some don't pay much at all. It is a fact that they pay peanuts. Why on earth you say what you do is beyond me. Are you an Australian?As to the rest of your post - it is you who have no idea Mick. More and more people (including businesses) are coming to the realisation that this Abbott/Hockey mob are utterly hopeless. Only Murdoch is grinning.

hidi:

28 Jul 2014 12:45:20pm

Stuffed Olive: Ok so your responsible union lead Labor government has taxed manufacturing to death and now you want to tax mining off shore and when they are all gone who then to fund the fat cats long service leave and luxury holidays.

Blzbob:

philip:

28 Jul 2014 10:12:47am

1) wait till the next election, unless you plan a violent overthrow of a democratically elected government ?

2) given that it was the previous government that introduced the current MRRT why do you think a new labor government wouldn't stuff up again ? Even when the MRRT came out, it was attacked for not going to raise they kind of money the government was promising it would.

3) i'm not sure how extracting money money from the mining companies will make it easier for the little companies which don't have the budget to absorb the extra costs your MRRT will hit them with.

4) we may be the ultimate owners of our mineral resources, but I don't have the billions needed to extract them.

Alpo:

28 Jul 2014 11:58:47am

Hi Philip,1) No overthrown of anything is needed, an election will do.2) Believe it or not, politicians (like anybody else) learn from past experiences. But I agree that they need more guts, the will of the People may help them further grow such guts.3) We require a differential MRRT (according to the size of the company) that does not overburden the small players. Like the tax threshold, that increases the higher your income is.4) Well, in reality we do have those billions, and in fact some mining countries (even developing countries such as Argentina and Chile) do have at least one big government controlled company that extracts their mining resources (oil in the former case, copper in the latter). But even if Australia does not want to go in that direction (for ideological reasons, for instance) we can do what we do now, and rent the extraction of our minerals to the private sector, but make sure we get a better value and a better deal.

To be absolutely frank with you, I just can't understand why any rational Australian would go against getting better value from our non-renewable resources.

hidi:

28 Jul 2014 1:02:44pm

Alpo: You don't understand why rational Australians don't want better value for their non-renewable resources. Have you ever thought rational Australians are rational enough to know mineral resources are available in other countries as well.

Alpo:

28 Jul 2014 5:52:08pm

hidi,With respect your reply doesn't make any sense. Yes, resources are available in other countries, so what? Do you think that we lack the technological ability to extract our own ore and sell it, and cashing up the whole revenue for our People (rather than overseas shareholders)? Do you really think that the impediment is technical, or commercial? Would our iron ore, for instance, be magically less competitive if it is extracted by a Public Mining Corporation rather than by BHP?.... The reason we tend not to get public corporations involved is POLITICAL, my dear! .... But if we decide to get BHP (or Rio Tinto) do the hard work for us, at least let's get a better deal! They will kick and scream and threaten this and that, of course they will (they have done it already, actually). But, like children, they will soon calm down when they see that their screaming is to no avail.

Joseph B:

28 Jul 2014 11:01:38am

A socialist formula for disaster. Let's increase taxes on our most successful industry that accounts for about 70% of our exports and watch these mining companies invest offshore, not in Australia. Oh and what a great idea lets spend more on the public service. We don't have enough public servants and they are so productive that we need more of them.

Alpo:

28 Jul 2014 11:46:01am

"watch these mining companies invest offshore"... They already invest offshore Joseph! Those who don't like the new deal, are welcome to move their iron ore mining activity to Zimbabwe if they want to (good luck!). Others will accept the new deal and fill the vacuum in next to no time..... You just seem to be falling for those Neoliberal myths that are still floating around.

Alpo:

28 Jul 2014 6:04:42pm

Peter, In principle I dislike the concept of "waste" as much as any Liberal does, believe me (and I start from home and my own personal economy, actually). So the problem is not: the left "likes waste", whereas the right "hates waste". The problem is: how we define "waste". Slashing of government expenditures and associated decrease in taxes must be justified in terms of those revenues not being needed because they were being "wasted". I still have to see any rationale for the slashing of government spending in this Budget based on a precisely, openly and convincingly defined concept of "waste".Just to cut a potentially long post short: note that it's easier to find areas of "waste", when you focus your accounting on expenditures but ignore the benefits. I find such approach to the identification of areas of "waste" unacceptable. Before deciding that spending money in this or that project or service is a "waste" you have to properly account for both the costs and also the benefits.

OUB :

burke:

28 Jul 2014 9:34:38am

So you are worried about their profits, if that is what eating themselves means. Yet you think axing the tax is a mistake. If the big miners were to make losses, improbable though it may seem, then the government would be paying them, under the terms of this very silly tax. Apart from that, your comments were (almost) sensible.

Dave In Melbourne:

28 Jul 2014 9:34:44am

This author obviously doesn't read the financial press, otherwise he would have known about iron ore mine closures and production scale backs in WA and the northern territory. That dominant players have lower operating costs than start-ups and lesser developed mines is more of a reflection of higher grade deposits being mined efficiently. Increasing exports is driven by increased demand. Maybe the author doesn't really understand global industrial production. maybe the author hasn't heard that the US has been coming out of a economic slump and is growing again.

This unfortunately is another biased all mining is bad article that pervades in the cringe-worthy world of abc lefty populism.

maybe the author could have a look at the concept of people earning money and paying for their families and education etcetera, but looking at the benefits of mining is not possible.Oh and the bit about dividends flowing to the foreigners is justjust disingenuous rubbish.

Could the author show us bhp or rio or fmg or newcrest paying selective dividends to shareholders by nationality please?

No. not a chance because it doesn't happen and the author knows it, or if he was doing his job, he should know it. shame on abc for peddling gratuitous rubbish.

Joseph B:

Peter the Lawyer:

But don't you know, the 'progressives' here just know that all would be well if the Govenment ran evry business in the land. Things would then be 'fair.'

Alreadygovernments run education and health. Soon they will be running all hosuing and food industries as well.

After all it is absolutely necessary that all human activity be regulated in the ineterst of the state, because Australia is the only unit we should care about, individuals don't matter, only tribes and victim groups. But even they can't be allowed to stand in the way of the State. All hail the State.

"War is Peace; Freedom is Slavery; Ignorance is Strength.""Who controls the past controls the future; who controls the present controls the past."

Tory Boy:

28 Jul 2014 9:39:31am

Whatever brings the resources industry to an end is good with me. It is utterly unsustainable, promotes ongoing population growth, and will only end in a degraded world for those unlucky enough to be born into it.

Ruby and Bella:

28 Jul 2014 10:08:27am

Dear Tory B, We think that down the track the smart money will be investing in renewables. As soon as industry believes that more and easier money can be made in that sector coal investment will really start to slump as will demand for it. Watch Clive Palmer in this area.

gbe:

Stuffed Olive:

28 Jul 2014 2:29:33pm

Solar and wind gbe (but you did know that surely). Ever heard of not having all your eggs in the one basket? Developing and exporting technology? The long term plan - how many more hundreds of acres of quality farming land should we lose to coal mines?

Charles:

28 Jul 2014 5:15:10pm

Stuffed Olive and Ruby Bella thinks that renewables are actually something that contributes to the GDP of a country, when in fact anyone with a rational mind would know that mandating a cost that everyone must buy for a product that has no utility (i.e. an intermittent supply of electricity) is actually something that drains an economy and impoverishes all.

Although I do understand in the minds of the ALP, Greens and the Left in general the story of the Magic Pudding is still regarded as core economic policy.

Caffettierra Moka:

29 Jul 2014 11:03:49am

Actually they DO contribute to the GDP. Gross Domestic Product is just a measure of the value of the total amount of goods and services produced in an economy in a set period. I learnt that in Year 11 Economics in the 1970's.

The reality is that energy generation is moving from coal based to a mix of natural gas and renewables. The Bureau of Resources and Energy Economics released stats on this on July 15:

-Coal is down 7% to produce 64% of total electricity generation-Natural gas is up 5% to 20%-renewables rose strongly by 26% and now contributes 13% of total electricity generated

Part of the drop in coal-fired electricty production is driven by a decline in total energy usage. One of the other 'green' technologies is more efficient use of power, looks like all those 'energy-efficient' lightbulbs are starting to pay off, huh?

Stuffed Olive:

29 Jul 2014 11:31:27am

Solar base load is now available. We've already exported half our technology on this because the local sods were too lousy to take it up. We can have coal and renewables in tangent but one day one will run out. Planning will get you everything.

Stuffed Olive:

gbe:

28 Jul 2014 1:26:14pm

Stuffed Olive: OK you have all the answers with mining winding back and a reduction in royalty revenues for the states who will then want more from the Feds what do you envisage will provide an income balance. Forget increasing the GST that is just like paying one credit card off with another.

Stuffed Olive:

28 Jul 2014 2:33:10pm

Actually they aren't winding back. Construction phase cannot go on indefinitely you know - got to dig it out and get the dosh flowing. Or are you just being your usual silly billy self? This is the stage when the states and the feds get some of the dosh too. I never wanted a GST so the last thing I would want is for it to increase. How about you stop deciding what other people think because you are always wrong.

Patrick:

harry:

28 Jul 2014 4:02:41pm

Yes, I bet you did. And if you go back and reread the online version you'll see this update to the wonderful work of Fauxfax "journalists"."NOTE: Reports, including this one, say that Glencore had not paid income tax for the past three years. This is incorrect. The company has stated that it paid more than $400 million in corporate income tax in Australia over this period. Fairfax Media also wishes to clarify that the $15 billion presented as taxable "income" in these stories relate to revenue and not taxable profits"

Stuffed Olive:

29 Jul 2014 9:04:53am

They legally fiddled the books everyone. It is a disgrace and the laws most certainly need to be fixed. I think Abbott actually muttered something about it with his talk to some international group, like the G20.

Peter the Lawyer:

28 Jul 2014 4:38:26pm

The SMH, like you dosn't seem to know the difference between assessable income and taxable income.

I have a client (an individual) who made assessable income of $10 over th last two years. Yet his taxable income in those years was a loss. This was because his deductions exceeeded his assessable income.

If you think that the income tax law is somehow deficient in allowing such losses to be claimed by miners, then change the income tax law. The deficinecies don't justify another complex tax law that somehow deigns a certain profit to be too much.

Mark O:

IEH:

28 Jul 2014 9:50:39am

Another good contribution, Ian !Your last paragraph sums it up beautifully, certainly "cementing our reputation as a nation of dills".Future generations will curse us for squandering our wealth and opportunities, with precious little to show for it except for a quarry !Well said !.

MACK1:

28 Jul 2014 9:53:02am

It might seem exciting to you Ian, but it is just normal dynamics of the markets. And if government interferes too much, the much-needed investors will simply go to other countries. Taxes kill investment mate, and investment provides jobs. We need more of it.

Xmas:

28 Jul 2014 10:33:39am

Mack,One point Is That The Investment Reward Is Skewed Too Far To In One Direction.The Mining Industry Does Not Provide A Comparitively Large Employment Base Compared To Other Industry Sectors Such As Manufacturing. It Is Highly Automated And Productivity Centric And despite This The Likes Of Ms Rinehart Would Still Like To populate Her Employee Base With low Cost 457 Visa Workers.

Esteban:

28 Jul 2014 1:28:50pm

Up until now the dividend payments to the investor has been very low with most profits used to expand mining activities. I wonder why the foreign investor is now pushing for higher dividends from Australia rather than reinvesting in Australian mines?

Why is the foreign investor pushing for their shares to be bought back?

Nova4avr:

28 Jul 2014 9:55:21am

What we should have done with mineral resources of the country was to charge the miners so much a ton for each ton they dug up. This would have avoided any tax loop holes they are now using to avoid paying tax, or in a lot of cases paying no tax at all. Also they have received all sorts of tax concessions during the setting up stage, together with the diesel fuel rebate.Yes, we have been fools or correctly our govts. have been fools or bought off by large donations to their parties.After all we own the resources, so if you want some of it you will have to pay for it & pay for it dearly, is the motto we should have adopted.

andy:

TrevorN:

28 Jul 2014 9:58:32am

So now it looks as though not only did we miss out on gaining any financial benefits from the miners during this last 10 year boom period, that we will probably have them gouging us of our tax dollars for the next 10 years to prop up the offshore dividends to their international owners and investors. It's business as normal: heads they win, tails we lose. And we will never learn!

OUB :

28 Jul 2014 5:50:23pm

Trevor you are a bit confused. Buy a poor stockbroker a lunch one day and he will be happy to give you his or her version of reality. It will be a bit closer to reality than Ian's version. Perhaps Ian should be saving you the expense and buying that poor broker a lunch. He could call it research and claim a tax deduction.

Lehan Ramsay:

28 Jul 2014 10:10:16am

I've got an idea, why don't we put the mining industry in charge of jobs, they can put together a work-for-the-dole scheme, breaking the stones down and extracting the vitamins and minerals from them. I reckon there'd be quite a goldmine there.

Lehan Ramsay:

Frank O'Connor:

28 Jul 2014 10:16:01am

Mmm,

I think the dollar remains high, not because of the mining boom and not because of the terrific state of the Australian economy ... but simply because many overseas economies are total duck excrement. The pump priming, qualitative easing, bank saving, zero interest rates (negative interest rates were postulated in some economies) and in general kid-gloves treatment of debt and credit deemed necessary in Europe and the US, allied with the massive sovereign debt in Europe, the US, the BRICs and China have simply made a positive interest rate, and a safe haven attractive.

Far from what our government has been saying, the Australian economy is a shining star by comparison.

Other than that, what you say about the miners does strike a chord. The 15% Australian Owned Big Australian and its similarly overseas owned counterparts have pretty much gotten what they wanted from the last election, and have a right to be smug and self satisfied. The Australian electorate was swayed by their $20 million advertising campaign (and was that money well spent, or what?) and the LNP's 'axe the tax' and anti mining tax arguments ... and so we will redeem nothing now that the production (as opposed to the investment) stage of the mining cycle has commenced.

Needless to say, the miners ... from whom we are now collecting nothing but state based royalties ... still feed richly at the pot of Commonwealth fuel subsidies, research and exploration grants and all manner of government support.

That said, even if we had come into this river of gold we would have wasted it on political fripperies and electoral bribes as we have done so often in the past.

Contrast this with Norway (which now has a sovereign investment fund worth in excess of $1 million per Norwegian citizen from its North Sea Oil revenues) and I think it's simply indicative of the low standard of our political 'elite' (in brackets because I use the term very advisedly) and the ever decreasing attention span of our electorate.

Dave In Melbourne:

F OC, You should try and look at a few facts. you say, from whom we are now collecting nothing but state based royalties. What about tax on profits. payroll tax, etcetera etcetera.

And Norway, yep 1M per head. and on 5Million people that is 5 trillion front or nearly $1Bln us. And that is since 1969 when oil was discovered. In contrast Australia's sovereign fund, The Future fund was started in 2006 worth $60Bln and now has $100Bln and we have 25 million people. lets see where it sits in 40 years. I bet it will be more than $1Bln.

Frank O'Connor:

Dave, I note you're a constant defender of the miners in this and other forums ... are you perhaps employed by one, or an employee of contractor to a miner?

At any rate ... you're very selective with your 'facts'. Almost as selective as the miners were with their advertising campaign two years back.

Tax on profits? According to them, and their accounting magicians, miners haven't made profits in years. They have to pay inordinate amounts to companies overseas, in nifty little jurisdictions like Monaco, Lichtenstein and the like ... for intellectual property, services, prospecting and discovery services, accounting and the like. They are self contained economics in themselves with a miasma of divisions and corporates arranged in a confusing cross jurisdictional structure that is put in place pretty much to generate a confusing web of transactions to defeat any domestic tax investigation. They don't use banks and finance institutions like the rest of us, they have their own finance companies and divisions to do that (which also further absorb profits by charging truly scandalous interest rates and fees and charges in cross company loan and other agreements that you would not believe).

Additionally, they mining companies have been so busy writing off their current assets using accelerated depreciation that they now have carry forward losses enough to last for a number of years.

What one seriously wonders is how the mining companies mange to issue franked dividends on shares, when demonstrably little or no company income tax has been paid for years. Has the ATO audited this?

Payroll tax. Well, the PAYE bit is actually paid by the mining company employees ... but there's ever fewer of them as mining companies shift toward 'employing' independent contractors rather than employees. The other payroll tax is also affected by this legal lurk, because payroll tax is only payable on payroll ... and additionally is levied by State governments and not the Commonwealth.

'Etcetera, etcetera' ... has about as much substantial fluff as your two examples mentioned above.

Finally, the Future Fund was established to pay for the governments obligations to its employees ... not as a sovereign wealth fund for the country at large. The bottom line is that every time we get any excess of funds in government coffers in this country, it tends to be blown at the next election on bribes and fripperies to please the electorate.

That's why I don't give much of a damn whether we get any money from the miners or not. Because if we did, given the historic behaviour of past governments in this country ... we would simply pee it up against a wall. I am so confident of that, I don't give a damn that the miners rip us off ...

Dave In Melbourne:

Frank, have you been listening to Christine telling you stuff at the bottom of the garden?

What one seriously wonders is how the mining companies mange to issue franked dividends on shares, when demonstrably little or no company income tax has been paid for years. Has the ATO audited this?

What complete rubbish. Utter fantasy land comment.Ummmm Yes the ATO does do audits and annually. Doh. So has Deloitte which reported that from 2007-2012 the company tax take from mineral companies has been approx 25% of profits plus or minus a percent here or there over that time. The royalty tax take has been between 17 and 14% over that time.

The Jones Crusher:

28 Jul 2014 11:07:51am

"Contrast this with Norway (which now has a sovereign investment fund worth in excess of $1 million per Norwegian citizen from its North Sea Oil revenues) and I think it's simply indicative of the low standard of our political 'elite' (in brackets because I use the term very advisedly) and the ever decreasing attention span of our electorate."

Frank.. when North Sea Oil was first discovered and Norway set about making sure they got their sovereign share from the outset, along with ensuring generous remuneration and working conditions for offshore oil workers, the economic right said that Norway would be priced out of the market, that oil producers would look elsewhere to invest, and that Norway and Norwegians would be left behind and endure a lower standard of living as a result.

Lehan Ramsay:

Lehan Ramsay:

28 Jul 2014 10:23:56am

A Royal Benefit or something. They could get all the local unemployed people on disability from their mining injuries to wave coloured lights and form a spontaneous runway. For all the private jets, it's mighty far to the nearest public airport.

Lehan Ramsay:

28 Jul 2014 10:26:56am

Which is why the government really needs to get serious about this unemployment issue before New Zealand too is depleted of resources. All very well to tell them over there that it's business as usual, no doubt the room was only half full at most and half of them were relatives, the poor New Zealanders are having to order most of their groceries online now, the sheep industry is having virtually to look after itself.

Lehan Ramsay:

28 Jul 2014 10:30:08am

The scheme was suggested by one of the leading professors in the field, admittedly rather small now, who says that the foreign student intake has been a lifesaver for local industry and training is proceeding at a fast pace normal production should resume in a few months.

Esteban:

gbe:

This has been coming for a few years and the left of politics have not been prepared to admit it happy to pin the faith on rubbery forward estimates.

Global mineral resources are plentiful and people are going to see just how easy it is to price yourself out of the market.

Our standard of living in Australia and wage expectations are way too generous for the income we generate and the debt we carry. Problem being some people don't know there is a hole in the roof until the ceiling falls in.

The Jones Crusher:

28 Jul 2014 11:03:03am

"This has been coming for a few years and the left of politics have not been prepared to admit it happy to pin the faith on rubbery forward estimates. "

Rubbery figures work both ways. Treasury underestimated growth and revenue every year from 1999 to 2007. Treasury overestimated growth and revenue every year from 2008 to 2012. Oh yeah... something about a GFC in 2008 but according to the right no such thing ever happened because Australia never suffered a recession like the rest of the world.

"Global mineral resources are plentiful and people are going to see just how easy it is to price yourself out of the market."

That would explain why Rio Tinto, BHP Billiton, and FMG have all reported record production in the last quarter, right?

"Our standard of living in Australia and wage expectations are way too generous for the income we generate and the debt we carry."

You are right about the income! We don't generate enough of it because the income we SHOULD be generating is sailing over the horizon in the holds of bulk iron ore carriers.

"Problem being some people don't know there is a hole in the roof until the ceiling falls in."

Dead Set! Just as well you have that big leftie bogey to blame when that happens...

orangefox:

28 Jul 2014 10:38:15am

During the Whitlam government there was an attempt for the federal government to buy all unclaimed mining leases from the state governments and use future proceeds for the benifit of all Australians.Guess who was against it?Yes, the Liberal Party.The average person now would most likely have amazing benifits of low taxes, free health, free education, early retirement and the government would be swimming in moneyInstead most of the benifits have gone to overseas interests and a few locals becoming filthy rich.

Gordon:

28 Jul 2014 1:07:37pm

Undeveloped mining and petroleum exploration leases go back to the government regular as clockwork every 5-6 years. If the government wanted to be in the mining business it has, over the years, had the entire Australian continent to play in many times over. Possession of the lease is not the issue, money to do the work, and the risk of failure is.

If you proposed tomorrow that the government spend 30 billion dollars developing some mine somewhere, who would be the first to scream? The people who want hospitals, schools and NDISs, that's who.

Let's say you won the argument and went ahead, but the price collapsed, or it turns out some rare frog lives in a sacred waterhole right there. What would you do then - with 30 bill taxpayers $ in the hole?

This why investors invest and governments regulate: the alternative is too messy for words. Google Baku oil fields if you want some images of what happens when the rule-makers are in the business themselves.

burke:

28 Jul 2014 4:30:35pm

Consider also how state banks fared - they all went broke. Consider how the NSW government operates mines - gives them away to their mates. Sure let governments run everything. It worked so well in Russia!

HPH:

28 Jul 2014 4:53:24pm

The Rule makers of Baku oil-fields are cooperating with the demands of the US Oil Corporations and are doing business together. Most profits go to off-shore bank accounts; Rich 1% gets richer; environment gets destroyed; people of the land get shafted thanks to the unbridled-market-capitalism. The USA rules in that part of the world.

Reinhard:

28 Jul 2014 7:59:56pm

Such dopey ideas as Medibank, free university, establishing diplomatic relations with China and the first trade practices act. He also outlawed discrimination against indigenous people and drafted the first Aboriginal Land Rights Bill. FYI Whitlam left Fraser a budget surplus and the Khemlani loan was going to fund infrastructure projects...

IEH:

28 Jul 2014 5:47:41pm

orangefox. You are partly correct !Whitlam was certainly motivated to build our- COMMON WEALTH !Have a look & see what Keating et al set about doing in 1991-92 in unwinding Whitlam's efforts. The flogging off of the Moomba - Sydney Gas Pipeline is a case in point . What a lovely little earner that would be today !

Investor:

28 Jul 2014 10:39:17am

It has been a fantastic boom that lasted long enough. I made enough money from it to retire at the age of 43. I did not squander the biggest opportunity to me, that this boom brought. Paid off the home loan (new double storey house in an inner Melbourne suburb), paid for 2 new cars with cash ($103,000), spent around A$120,000 on global travel (41 countries) and still have enough left to retire on. Planning my next two overseas holidays for 2015. Life is good.

Peter the Lawyer:

28 Jul 2014 4:57:03pm

Stop talking rubbish.

The situation here and in Norway is entirely different. WHat happened there could not happen here. The scale is too vast.

Also what everyone forgets is that in the oil market the European producers could charge high prices, because the really big producer in the ME were doing the same. WIth iron ore that option doesn't exist.

Sea Monster:

29 Jul 2014 8:44:58am

I'm afraid you're wrong again, hph. Norway is more reliant on mineral extraction than us. It accounts for about 20% of their GDP. Most of this is oil. Mining accounted for about 10% of our, at the peak of the mining investment boom.

Which further suggests that Norwegian prosperity is more a case of dumb luck than strategy or the temperament of its people. Norway is facing similar problems to us because of this. Due to persistent high exchange rates manufacturers and tertiary processors (like timber milling) are moving offshore.

By the by primary production features prominently in Denmarks economy (oil again and agriculture). Much of Sweden's recent prosperity is also down to minerals. It possesses some of the highest quality iron ore deposits.

QC Bob:

29 Jul 2014 12:17:19am

The analogy I was attempting to make was that both country's had finite, natural resources to exploit so we may compare the different ways our respective countries have managed, used and/or invested the spoils. Use the same time period as Investor's life. 43 years or since 1970. How does Norway and Australian politicians compare regarding managing the extraction of the resource and supplement use of the spoils during that time frame?

QC Bob:

29 Jul 2014 12:18:39am

The analogy I was attempting to make was that both country's had finite, natural resources to exploit so we may compare the different ways our respective countries have managed, used and/or invested the spoils. Use the same time period as Investor's life. 43 years or since 1970. How does Norway and Australian politicians compare regarding managing the extraction of the resource and supplement use of the spoils during that time frame?

Handoyo:

28 Jul 2014 10:41:06am

So the Minerals Councils managed to stuff and mount a former PM's head for $20 million, which along with the saved billions from the diluted MRRT was a bargain for big miners. The Big Four have enough flex with legislation that they can go straight back into flogging financial products that benefit them more than their clients, only several years after the most sobering financial crisis in living memory.Basic needs like housing are squeezed to the extent that people can't afford to have children and a house on a single average income - while the entire market is warped by developers and investors.Doesn't that make us more of a kleptocracy than a democracy?

less than best:

Dave In Melbourne:

OUB :

28 Jul 2014 6:12:55pm

$20 million doesn't sound like much to me when the RSPT looked set to loot billions from shareholders. Do you reckon that might indicate the lunacy of the original idea? You, know, making Australia's mining industry the second most highly taxed in the world, just to save Rudd and Swan the embarrassment of a string of deficits.

If you didn't like the MRRT blame Ms Gillard, the woman prepared to sacrifice what Labor saw as her country's interests in the hope of being re-elected. No price was too high, so long as her success was guaranteed.

Funny, we have a 'progressive' blogger above complaining about the prospect of Singaporean developers building cheap homes here. Perhaps you two could have a discussion.

Patrick:

Lehan Ramsay:

28 Jul 2014 10:46:09am

Of course mis-allocation of task is a symptom of organizational downturn. Having the mining industry fly into the Ukraine and extract every last speck of dust from that crash site having it over here within days if not hours would have made powerful economic sense.

Joseph B:

28 Jul 2014 10:56:46am

Australia is headed for a well deserved recession. Mining has always been a cyclical boom bust industry and we are facing the perfect storm for economic collapse. About Iron ore and coal make up about 48% of our exports, add other minerals and oil and gas and that represents about 70% of our exports.

The Chinese growth has been financed by a large growth of bad debt that will come home to roost and we are already seeing signs of slowdown in the Chinese economy as their government tries to get control over their shadow banking debt. China is no longer the cheapest place to manufacture and demographics means the boom for China is over.

Australia is living in a fools paradise with the highest minimum wage and penalty rates in the world. We need a labor force that is more globally competitive and diversify our economy, and train people in skills such as IT that have a future.

Peter the Lawyer:

28 Jul 2014 4:59:45pm

The problem is that we can never do the disired things because lefties are always sooling governments onto the economy and distorting things. The market itself would work out what is needed but the market is so despised by the left, who really don't understand it and are jealous of those who do.

Maynard:

Maynard:

28 Jul 2014 11:06:20am

I think that it is called exporting commodities that have both a global supply and demand function.Unlike the non trade-able sector of the economy (eg our ABC) there is also a global price, that declines as supply increases.It is impossible to hold back Australian supply as others from around the globe will fill that hole.If only we could all get ABC terms, conditions and prices that the taxpayer could meet.

Charles:

28 Jul 2014 11:16:44am

We are starting to see the extent of economic illiteracy that dogged the Rudd/Gillard governments in these articles by Mr Verrender, who has yet to realise the consequences of what his grand ideas might lead to fpor the Australian tax-payer

For example, maintaining the initial form of the Mining Tax, it would have put all Australian tax payers on the hook for the losses these mining companies are about to experience with a decline in price and demand. Make no mistake, though we might have extracted some extra money (not a lot) at the beginning, we would now be funding their losses which they are starting to turn into due to the downturn in China.

No wonder we are in such diabolical economic times when we have persons of this calibre who are jumping off a cliff of logic, merely to validate their ideological views

OUB :

28 Jul 2014 6:17:49pm

I can reassure you of one thing. There is no way Labor would put its hand in the taxpayers pockets to reimburse the mining industry for any losses brought about by Labor policy or not. It would be a case of victim blaming and 'you're on your own boys'. You saw the 'greedy fat miners' BS Swan carried on with. It would be uglier than that when miners went looking for a handout.

Gordon:

28 Jul 2014 11:20:11am

Ian is a clever fellow and like many clever people before him believes that someone orta be planning all this out ahead of time, like maybe in 5 Year Plans. Good luck with that.

The resources game has always been about short unpredictable price peaks dragging in enthusiastic new money, then a long slow washing out of inefficient and higher-cost producers as prices decline again.

A fact that Ian never seems to acknowledge is that none of this risk falls on the taxpayer. The original mining tax would have seen the taxpayer refunding 40% of mining company losses. If you think losses are unlikely you know nothing about the resources game.

The tide is falling, and those swimming without their shorts will soon be exposed. Linking recurrent spending to income as volatile as a mining profits tax puts all of us in the pool.

As I and others have said before: participation in the funfair ride of mining investment is freely open to all, with your own money. If the sums wasted on scratchies, pokies & geegees over the years had gone into productive investment we would not now be bleating about foreigners owning our stuff.

OUB :

28 Jul 2014 6:33:40pm

You make a good point that should have been mentioned by Mr Verrender. The Australian miners aren't looking to cannabalise each other. It is every man for himself, against the world. Rio and BHP have been very disciplined in much of their expansion (let's not mention Alcan). They have been committed to finding and developing large low cost resources, leaving smaller ventures to smaller companies (on what are generally very generous terms). They have been looking to play the long game. With low costs they can operate profitably when others can't. I gather Chinese iron ore costs in the vicinity of $80 a ton. If the prices fall below that and stays there for any length of time those operations will either go out of business or be mothballed. Rio and BHP can just keep doing what they are doing and pay taxes while they do it. Fortescue should be okay at those levels despite their poorer grades, having put a big effort into paying down their debt. The juniors may well find it more difficult.

It isn't private enterprise's job to care about the community. Nor is it yours or mine. We do what we do, we pay our taxes and elect governments to manage those funds. If you have the time and inclination your efforts at volunteering would be appreciated. If you are interested have a look at what the BHP Foundation does. I'd be surprised if Rio didn't have something similar.

James:

28 Jul 2014 11:44:55am

The article seems to be suggesting that increasing output drives prices lower and therefore is a mistake. But wouldn't we be even worse off if we tried to restrict output to maintain high prices? Because then the output growth will simply come from other countries (e.g Brazil, various African countries) which will push prices down anyway, except now we don't have the volume growth to mitigate the pain. Is this reasoning not sound?

Forrest Gardener:

OUB :

28 Jul 2014 6:47:39pm

Sounds right to me James. Perhaps Mr Verrender will develop that thought in his next article, even though people have been saying such things since the advent of the RSPT. (He's got a history at Fairfax, still struggling to escape that particular groupthink I expect).

Once miners start putting infrastructure into remote areas in Africa it will be a much more simple matter to develop new mines sharing that infrastructure. There will be many cost advantages over Australian mines, balanced out by some higher costs and higher risks, depending on the country. But hey, let's get Labor back to totally stuff up our mining industry and give our competitors the leg up they need to get started.

James:

Lehan Ramsay:

28 Jul 2014 11:47:31am

Odd, really, that a country so full of mines would be wanting to phase out coins and have only plastic money. I guess when you go to the mining moguls and ask them about how much they're really getting per tonne the credit on their skype accounts run out.

Dissenter:

28 Jul 2014 11:48:54am

Instead of focussing on mining boom we should simply as a nation focus on mining. If the miners are mining more THEY are STILL our resources and irrespective of how much is paid a tonne they should still be paying the MINING tax.It should not be repealed. It is up to the miners to find new markets. If China has ceased building find another nation which is still developing and building.The Australian people HAVE BEEN DUPED and continue to be CONNED and con the people. We have funded their infrastructure and we subsidise their FUEL and STILL Glencoe has avoided tax and is one of many most likely.Is it not time to DEMAND MORE of these HIGHLY PROFITABLE multinationals to Australia's best BENEFIT.They employ few people for HUGE profits.Labor HAS to BLOCK the repeal of the MINING tax. IT IS THE TEST FOR LABOR and SHORTEN. IF IT IS NOT BLOCKED we WILL know he and the RIGHTS have sold LABOR and the people of Australia out.MINERS are BIG POLLUTERS and BIG destroyers of landscape. WHILE we are at it we should demand THEY CLEAN UP AND REVEGETATE their exhausted sites.

Maynard:

28 Jul 2014 12:08:53pm

They are paying the mining tax; it's called royalties and these are shared throughout Australia via the commonwealth fiscal equalisation scheme. hence there is a magic pudding that we all share in.I reckon that bill doesn't understand this either.

Dissenter:

28 Jul 2014 3:19:49pm

As you know because you must work for the con artists royalties are for the right to mine and the mining tax is for the amount and profits. Australians are sick of the lies and the time has come for PAY BACK.

OUB :

Lehan Ramsay:

28 Jul 2014 11:54:24am

I suppose they'll be working for the dole if the government can get them to do that without it contributing to their case for refugeeship. They did after all fill in a questionnaire about whether they intended to work, and I'm hoping they all said yes. And I suppose the families of those people who died in the airplane will be asked to contribute to the task force. That's almost always the way it is. Even in WWII they had to do that, probably even in WWI, the red cross got half their wages for every cigarette, naughty people.

Lehan Ramsay:

Ajay:

28 Jul 2014 12:14:48pm

There is an awful lot of economic ignorance on this forum. Let me explain how it works.Australian states own the minerals (that thing called the constitution)people can apply for a lease that lets them explore for minerals and if they find them they get first dibs in returnn for paying the states a percentage called a royalty.The states could do,some of this themselves but it costs a lot and they could only afford to do a small number. Experience worldwide has also shown that stars (nationalised industry) are very poor and inefficient at this.the states can change the royalties if they want but if they put them up to much noone buys a lease, they go to another country where it is cheaper. The mining companies employ people called economists who decide where, taking into account royalties, labour and construction cost and risk, it is,best to put their money. A mine is a 30 year asset so the chance of the rules changing under you is a significant risk. Therefore companies like Australia and Canada et all over tin pot countries in Africa because though costs are high, risk is lower. if we start changing the rules under them all of a sudden we're almost as risky as some tin pot countries. They are a lot cheaper, so guess where the money goes?

If we let multinationals invest with a stable regime of royalties we get 30bn of investment in a mine, 40% plus of that is,spent here. We get several thousand highly skilled construction jobs. These people pay tax at nearly 50%. We get several hundred long term operations jobs. Again highly skilled. We get royalties for the states. Federal govt gets income tax and company tax.

meredith:

28 Jul 2014 12:18:35pm

There are none so blind apparently. To think many thousands of Australians objected strongly to the super minerals tax when it was first introduced. I guess they prefer that the pensioners and low income employees take the brunt of a budget fix rather than these multi national companies who expect to make fortunes out of our resources but objected strongly to the super minerals tax being imposed. I would like to see Australians take their blinkers off and stop believing the mantras of the Coalition and the big mining companies who they support. Where is the flow down to the ordinary Australian - certainly not by way of jobs.

Dissenter:

Patrick:

28 Jul 2014 3:37:31pm

Crazy isnt it?. Never was there a more clearer example power of the massive right-wing media in this country. And some on here want to nobble the ABC because they opine that it is too left-wing.They want every media outlet to follow like sheep as the rich and big business ransack the country.

I believe now the working taxpayer has finally realised they have been taken for a long, costly ride by the pretenders in power.

OUB :

28 Jul 2014 6:56:19pm

Perhaps if we encourage mining here rather than destroying investor confidence with a new tax every year after they have invested their money the miners will keep coming here, doing business and generating taxes. Then governments can more comfortably look after welfare. Don't forget the proceeds from the mining taxes were earmarked for defined purposes. Pensioners weren't on the list. Mr Rudd and Ms Gillard would have thought kindly of them just the same I am sure.

Esteban:

Global investors want to see increased dividends from Australian mines rather than plough the profits back into mining expansion within Australia.

Global investors want to exit Australian mining bu buyback schemes.

The author of this article seems surprised by these things. However he is not alone because the left have never been able to come to terms with the risk mentality of the global investor.

Any fool can increase the tax rate for mining once the billions have been spent on establishing the project and it is stupid to close it down. The challenge was to ensure that the Australian people extracted the most revenue from minerals without ambushing the miners and causing their investment levels to fall.

Forrest Gardener:

Maynard:

28 Jul 2014 1:44:19pm

Ian the assumptions are incomplete.Royalties are charged and paid to state governments on each ton of ore produced. State governments being the owners of the ore.Now via the state fiscal equalisation grants (essentially the breakup of the GST) the amount of these royalties by state are accounted for and the grants to the relevant state are reduced by the amount of the royalty. Hence Qld & WA, in particular share these royalties with all states by getting a lower state grant from the pool. In effect the pool is increased by the amount of the royalties.Each state has the option of setting up a fund to account for the proportion of mining royalties in its final grant.This is basically a state responsibility, not a federal one.The MRRT only confused this issue & is reduced by the amount of any royalty. Indeed with declining ore prices and increased production the royalty payment increases. The best of all worlds and the dreaded foreign owners are made poorer not us.

Nova4avr:

28 Jul 2014 3:05:42pm

I actually thought that people of Australia owned the resources of the country, not the state govts. I know the state govts. like to think they do but they don't.It's the same with state owned assets, which some states are presently planning on selling, but they have conveniently forgotten that we already own them so why in the name of hell do we want to buy them back.

OUB :

28 Jul 2014 7:14:38pm

Why did you think that Nova? You didn't believe Mr Swan did you? The minerals were vested in the Crown as representative for each State when the States were still independent. The Constitution did nothing to remove those rights. The hippie concept that the minerals now belong to the people and that the legal system is silly won't get you very far.

If you don't buy assets off the States how will they be able to afford new infrastructure? I guess if you feel strongly enough about the subject you can buy the assets and donate them back to the States with a proviso about not selling but frankly I can't see the point.

aGuy:

It appears Ian Verrender knows more about the mines that are being purchased than the purchasers.

Mining isnt done for fun. It is done for profit. Of course some mines will not deliver a profit as per any investment. The mining sector will also have times of increasing and decreasing growth.

I trust the individual who has looked at the potential mines yield and operation dynamics far more on whether the mine is profitable. I am sure mining bodies look at projected growth in demand and that is also factored in.

A collection of mining experts may know more about a potential mines profitability than an expert journalist.

phil:

28 Jul 2014 2:26:43pm

We have mountains of gas and coal ,and infrastructure thatis geared to supply maximum usage only a few times a yearwhy aren't our manufacturers offered cheap power at off peaktimes. to offset the difference in wages, my understanding is thatactual power production takes up only 20% of the price of householdpower.People in service industries are going under because theycannot pay their power bills.Our minerals will not rot if left in the ground for the prices to rise ,or for the next generation.In the meantime they should be supplying our own manufacturersand creating jobs.

kog:

OUB :

28 Jul 2014 7:19:00pm

Prices are a function of both supply and demand. If supply is increasing faster than demand and you keep your prices steady you will have a vast stockpile of unsold minerals as fast as you can blink. Gets quite expensive to fund pretty soon after that.

phil:

29 Jul 2014 7:46:22am

Why are we in a race to deplete our nationof every natural resource as quickly as possible?What time spans are are leaders and heads ofmining companies looking at? 20 years100years?If you look at the timespans of ancient civilisationswe are youngsters.Do we really want to end up like Easter island?Are we that selfish that we want to leave nothingfor those who come after us?

ltfc1:

28 Jul 2014 2:36:39pm

14 May 2013 'Swan tax slug funds surplus'! Do all you Labor loving Greens remember this piece of spin from your world best treasurer? The federal government has unveiled $43 billion in spending cuts and tax increases over four years to pay for its signature education and disability reforms and to fund a belated return to surplus in what is the last big roll of the dice for Labor before the September 14 federal election. But wait there's more! Taking the high-risk approach of asking voters to put the national interest before self-interest just four months before polling day, Treasurer Wayne Swan has hit both business and families hard to find the savings, which total $121&#8201;billion over the next 11 years, and include abolishing the baby bonus and more than $6 billion in business tax breaks and loopholes. But wait there's more! The budget predicts the $43.4 billion deficit from 2011-12 will be more than halved to a deficit of $19.4 billion this financial year. It predicts an $18 billion deficit in 2013-14, before reaching a ??balance?? of $800 million in 2015-16 and a surplus of $6.6 billion in 2016-17. But wait there's more! The budget forecasts the mining tax to raise just $5.5 billion over this year and the next four years. In October, the mid-year update forecast the tax to raise $9.1 billion over this year and the next three years. This budget says the tax will raise just $200 million this year, one-tenth of the mid-year prediction. Now if this mining tax was supposed to raise all the money needed to fund the debt and the new spending, I ask 'where is it'. The truth lies in the facts which clearly show the money for education and disability were coming from the mining tax! Mr Swan said the biggest test for the opposition would be to support the savings measures! Now I'm sure I've heard that recently, haven't you?

dman:

28 Jul 2014 2:57:12pm

"Our resource giants are preparing to eat themselves, gearing up for a fight to the death where only the strongest or most efficient will survive." - sounds like business as usual for every other industry.

I dont think the mining industry is as important to australia as it makes out itself to be. The revenue from exports is slowing and it only employees very few people in Australia compared to other industries. Plus it gets heaps of tax breaks.

Stuffed Olive:

28 Jul 2014 4:30:25pm

One day the Abbott loving, mining companies pay too much tax and foreign ownership is perfect Right wing commenters here on The Drum will actually know what they are talking about. When 'hell freezers over' I'm betting.

whatif:

28 Jul 2014 4:54:07pm

There should be a resources tax set up and it should work on the same principal as the Netherlands, it is used for the benefit of all people, look at what they have done then take a leaf out of a book that works, resources belong to the country they are in and the people should benefit from the sale or mining of those resources. Not big business ripping the guts out of the country and then treat the land with disrespect.

slothskin:

Peter the Lawyer:

28 Jul 2014 5:12:17pm

It is obvious to me what is wrong with this country. Our education system is so bad that we don't teach our children about how commerce and capitalism work. In fact, if this forum is any guide, our teachers are instilling a love for unearned income and handouts in our children, supplemented by a hatred of profit-making enterprise and envy of anyone who is better off than you.

What we need is a revolution in education. We need to teach people how to succeed in capitalism, not to ignore it.

If Australians had been aware of how trade and commerce actually work, they might have been able to get more value out of the mining boom by being shareholders in the mining companies.

the egg:

28 Jul 2014 9:21:27pm

Try the public education system. We don't even bother to educate our young !! Bring yur own pens and toilet paper is the latest gig. They are just fodder for the mines and any other low wage enterprise that business comes along with.I see the business mob in WA are back into penalty rates again. Dear old Dierdre Willmott is forecasting the demise of getting a decent pasta served by the peasants when she and her like want to go forth for a feed at the weekend if those terrible penalty rates continue. No doubt her office is firmly shut at 4 30 pm on fridays.

HPH:

28 Jul 2014 6:01:55pm

We are not all stupid, Paulm.

Some of us can see the theft and are powerless to do anything about it. Some of us duped by the MSM into voting for The Liberals. And some of us just don't care as long as we are fed with "football, meat pies, kangaroos and Holden cars"

not the yank:

meredith:

29 Jul 2014 8:42:02am

Of course! It is far better for you to have a healthy investment portfolio. Meanwhile Australia misses out on infrastructure - highways, hospitals, schools, all those things that go to make a country great. Our politicians cry poor but the feathering of individual nests goes on.

turtlelover:

28 Jul 2014 6:22:01pm

The dills are indeed in a pickle.We forget that the entire economic system depends on a functioning environment. Then we dig the country up, sell it to anyone with dollars and hey presto we wonder why the temperature is going up and the Pacific islands are going under water and guess what after a while there wont be enough food to go around. And dear me with climate change there wont be any food to import either. Then some of us rather than starve will get in leaky boats and try and get to some other country where its not so bad but when we arrive how will we be treated? Tortured, starved, deprived of water, exposed to diseases. We just may turn into terrorists if we have the chance. Ironic isnt it?

CR:

We all knew that the big multinationals were going to try to rip us off and it looks that they will succeed even more than under the failed MRRT.

As someone who is to the right of the political spectrum I humbly request that we leave the stuff in the ground for many, many years to come.

Leave the iron ore alone, leave the coal and uranium alone. If we want the stuff out of the ground then think about it for economic and strategic reasons in 20 or 30 years but not now. I would be very surprised if the average Australian will get anything substantial out of mining in a few years - and as ian said after it causing untold econmic damage to us.

GSP:

28 Jul 2014 7:09:21pm

Norway has managed its oil/gas mining boom much better than Australia. They now have a $800 billion fund generating a cash flow sufficient to support every Norwegian in their old age. We will have nothing but holes in the ground and memories of great holidays in Bali. But Aussies are dills, falling for the mining giants propaganda on the Resource Tax, and then voting for a cruel political party that is funded by those same mining giants.

IEH:

28 Jul 2014 7:54:31pm

GSP - Well said !The big worry is the Labor Party !Our alternative , on past performances , with little backbone.Still too busy "navel gazing" & fighting internal wars, than developing and articulating good public policy.The big mining corporations must be relishing the possibility of doing them over again.Little wonder their "elder statesman", a man with principle, intellect & backbone, Sen. John Faulkner is bowing out.

Steve Carey:

28 Jul 2014 9:21:15pm

I note that some people posting keep repeating that States levy an impost (royalty) so that mine taxes are a State issue. But I read recently that the States (being in competition with each other for investment) give back to the Miners, a substantial percentage of these royalties. So we the People get even less than our due. Also Fairfax recently ran an analysis on one of the biggest miners (Glencore?) effectively paying no tax at all. What a sad way to run an industry where we are duped at every turn. Stevenroger1.

VetTeacher:

The article sheds light on the true nature of the resources industry. What is highlighted is the absolute dependency of the miners on the balance of supply and demand at any point in the price cycle.

When things are booming the miners do better than very well thank-you. When things cool off they like any other industry have to sell more product to maintain the same level of income. Nothing unusual in that.

What is strange is that approval has just been granted for the largest coal and iron-ore mining projects ever in Australia to go ahead when the industry is supposedly on its knees. Huge crocodile tears and passionate campaigns against the Carbon Tax and MRRT have added to the impression that the sky is falling in.

And yet for all the heartache actual volumes of minerals and coal going overseas are actually expected to rise as existing ventures come online. As sure as night follows day prices will rise again when the world economy recovers.

Oversupply (and over-investment) in an industry is as much a management issue as all the other elements that feed into profitability. The fear for Australians is that all this will prompt demands for even more tax concessions and subsidies.

Other countries appear to be able to maintain a sustainable industry for both the industry and an appropriate return for the Australian economy.

Far from being the destroyer of the industry the MRRT was depicted to be it is a totally appropriate instrument which ensures the return to Australia for its resources keeps pace with increases in profitabilty of the products.

Alternative3:

29 Jul 2014 8:58:27am

"Combine those two factors and it all adds up to a disturbing scenario. Our resource giants are preparing to eat themselves, gearing up for a fight to the death where only the strongest or most efficient will survive."

You have just neatly stated the concept of economic efficiency which is the primary reason the Oz mining industry exists at all, but being a senior member of the ABC Workers Collective you have ignored that and tried to make it a bad thing.

There are several dozen places in the world that have the iron ore but the infrastructure and skills are either not there or were there but are now declining after interference or neglect by govts who think it happens by good intentions and political theory. I am betting you would approve.

GeroDero:

29 Jul 2014 9:16:18am

Yes, dills. The "bottomless pot of gold" is exactly what those people who do nothing about this must think we have as a nation. But, once sold in the low price market, you can't get it back to sell later.

GusDon:

OmegaEconomics:

29 Jul 2014 11:53:31am

Ian Verrender shows once again how much more astute he is on economic matters, than the Flat-Earth economics brigade that still believe in the Efficient Market Hypothesis after a global financial crisis.

Yes, the 'geniuses' (at RBA and Treasury) that have allowed our exchange rate to destroy our manufacturing sector, because they were too lazy to build an Intergenerational Sovereign Wealth Fund (that could have reduced the exchange rate and saved some of the windfall for funding the ageing population) will regret the day when 'digging dirt' no longer pays a first world income.

You cannot get your engineers and scientists back to re-build the manufactuing sector. It will be far too late and we will be a spent quarry.

Free trade is the oldest argument in federal politics and the issue that literally defined the federation era but opposition exists to the TPP, courtesy of the Investor-State Dispute Resolutions clause.